By Kim Yoo-chul
Microsoft (MS) is fretting over the possible leak of confidential data to Hancom, Korea’s leading software provider, which recently bought MDS Technology, one of the U.S. firm’s local distribution partners.
According to a recent regulatory filing, Hancom, MS’s local rival supplying Hancom Office, an MS Office-like suite, signed a tentative agreement to buy MDS for 74.5 billion won.
Hancom is now carrying out due diligence to check fact sheets and other financial details before finalizing the deal.
The final price tag may either be increased or decreased by 10 percent percent according to the results of the due diligence, Hancom officials said.
Industry sources familiar with the matter said the deal is making MS executives in Korea uneasy as MDS has been selling MS’s Windows-embedded software and Windows mobile solutions as one of its most-trusted distributors.
MDS Technology is a leader in the distribution of MS-embedded solutions with a 55 percent market share, followed by SGA, Advantech and Uniquest, they said.
“With the deal, Hancom can access all sensitive information such as pricing strategy, products and internal sales by MS and I believe that will be a bad thing for MS,” said an executive at a local software company.
The executive added that it is highly probable that key business strategies are shared with local authorized distributors, given that MS has recently pushed the “One Microsoft” strategy, which unifies the software kernel that powers Windows Phone, Windows RT and Windows 8, to simplify development of applications across various operating systems.
A spokeswoman at MS Korea declined to comment on the issue, while representatives at Hancom weren’t available despite multiple attempts to reach them.
“Top management in MS Korea is studying the effects of the latest move by Hancom and how the deal can impact the global software giant,” said another software expert based in Seoul.
“By June 1 this year, MS will renew its contracts with local distributors for MS-embedded products. MS is likely to have second thoughts about renewing with MDS.”
Hancom explained the deal is aimed at lifting the sale of its word processing solutions and strengthening distribution channels of its products by utilizing MDS’s extended client base.
Hancom’s Hangul application and MS’ Office program are used alongside each other in many Korean companies.
Hancom has been MS’s key rival in the race for word processing solutions in Korea over the last two decades.
MDS Technology, which is registered on the Kosdaq, supplies embedded solutions from automotive, information technology, industrial applications, mobile, defense to aerospace industries.
Last year, it generated 71.8 billion won in revenue with an operating profit of 25.1 billion won.