SK Networks Q3 Revenue Falls Despite Improved Business Results as AI Transition Accelerates

SK Networks is accelerating its AI transition, but its third-quarter results still contracted. On the third-quarter consolidated basis announced by SK Networks on the 6th, revenue came to KRW 1.9357 trillion and operating profit to KRW 20.1 billion. That was down KRW 36.9 billion in revenue and KRW 2.2 billion in operating profit from a year earlier, when revenue was KRW 1.9726 trillion and operating profit KRW 22.3 billion.

However, performance improved in some legacy businesses. Walkerhill improved profitability on the back of strong lodging and food-and-beverage businesses, with operating profit rising 57% year over year to KRW 9.1 billion.

Walkerhill also posted a new result in U.S. kimchi exports. Following Walkerhill Hotel kimchi, 'Supex Kimchi,' the first premium kimchi in the hotel industry, achieved its first export to the United States.

Results improved in some businesses on the back of stronger product demand, increased advertising spending, cost adjustments, and brisk sales of AI- and data-related products. While SK Intellix owns the health platform brand SK Magic, sales of SK Magic's ice water purifier line rose from a year earlier. This was driven by the spread of home cafe and home drinking culture and growing interest in differentiated water purifiers with ice-making functions.

Incross's operating profit rose about 50% from a year earlier. Advertising spending tied to new game releases was cited as a factor behind Incross's performance. In the ICT business division, handset sales and marketing expenses were strategically adjusted.

At SK Networks Service, sales of AI- and data-related products such as servers and storage posted strong results. These factors helped drive the improvement in performance. However, despite improvement in some businesses, overall consolidated results declined.

The company cited expenses related to career transition programs during the organizational restructuring process as the main reason for the decline in overall consolidated results. It also said costs incurred in the process of transitioning to an AI-centric business holding company were reflected in the results. As an extension of this transition, SK Networks has run an AI transition (AX) capability-building program since earlier this year for all employees with external specialist institutions, while also working on personalized AI agents. The scope of AI use in the workplace has also expanded.

SK Networks is pursuing an organizational restructuring to apply AI to each business and identify new business opportunities. The company is supporting AI adoption by business unit while also helping uncover new business opportunities.

This strategy is aimed at integrating AI technology into existing businesses and enhancing operational efficiency. The company has set a goal of securing medium- to long-term competitiveness through this effort.

SK Networks is currently pursuing investment in AI technology companies and AI integration into existing businesses at the same time. Its cumulative investment in Upstage stands at a total of KRW 142 billion, including an additional KRW 27 billion invested in February this year and another KRW 50 billion in March this year.

An SK Networks official said that proactively building the capabilities of employees, work processes, and operating systems needed for the AI transition is essential preparation for the company's long-term survival. The official added that the company plans to enhance the execution of AX internalization, which it has pursued since the beginning of the year, and create tangible results through collaboration between its invested companies and existing businesses. The company aims to accelerate AX internalization execution and achieve meaningful revenue in next year's business.

Phoenix Lab, established through SK Networks' early-stage startup incubation program, successfully attracted its first external investment by securing an investment round of USD 8 million. Phoenix Lab has been developing 'Kairon,' an AI drug discovery solution, and the success of this first external fundraising was attributed to recognition of its AI technology capabilities and business development capabilities.

SK Networks is continuing its relationship with AI technology companies such as Upstage and Phoenix Lab while pushing AI integration into its existing businesses. Using preparation for the AI era as its strategy, SK Networks is maintaining a future-oriented innovation direction, while also carrying out organizational restructuring and promoting stronger AI capabilities across all employees as it accelerates its transition to an AI-centric business holding company.

A key point to watch going forward is the results of collaboration with AI technology companies. Also drawing attention is whether new businesses in subsidiaries will translate into meaningful revenue growth, and whether profitability will improve through more efficient organizational operations.

Source: TECHWORLD · Kim Hye-jin
Original: https://www.epnc.co.kr/news/articleView.html?idxno=409414

References

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