Establishment of Two New Corporations NCQA and NCIDS
First CEOs Appointed: Jinseop Kim, QA Center Head, and Jaejin Lee, Former CEO of Woongjin ThinkBig
Labor Union Opposes Spin-off... "Concerns Over Layoffs"
NCSoft has embarked on a high-intensity management efficiency improvement initiative. The company plans to spin off part of its organization by physically dividing two business divisions, aiming to reduce its size through cost-cutting and workforce reduction. Significant resistance from employees is expected, likely causing considerable difficulties during the spin-off process.
On the 24th, NCSoft held an extraordinary board meeting and announced the decision to split the company and establish two new subsidiaries.
The new companies are two unlisted corporations tentatively named ‘NC QA COMPANY’ and ‘NC IDS COMPANY’. The size of the spun-off organization is about 360 employees. Consequently, the number of headquarters staff, which currently stands at around 5,000, will decrease to the mid-4,000s.
This split will be conducted through a simple physical division method, where 100% of the shares of the new companies will be allocated. After the split, the capital of the surviving company will be KRW 10,977,010,000, while the new companies will have capital of KRW 6 billion and KRW 7 billion, respectively. The surviving company, NCSoft, will continue to operate all business divisions except those subject to the split and will remain a listed company.
‘NC QA COMPANY’ will specialize in the QA (Quality Assurance) service business division. The existing NC QA Center will become independent as is. Its business areas include ▲ software quality assurance services and other related businesses ▲ computer programming, system integration, and management ▲ information technology and computer operation-related services. The CEO will be Kim Jin-seop, head of the NC QA Center.
‘NC IDS COMPANY’ will specialize in the applied software development and supply business division. It combines three departments: the existing IT Infrastructure Office, User Growth Platform Center, and Biz Solution Center. Its business areas include ▲ applied software development and supply ▲ computer system integration consulting and construction ▲ system software development and supply. It can be understood as a system integration (SI) company similar to Samsung SDS or LG CNS. NCSoft has recruited Lee Jae-jin, former CEO of Woongjin ThinkBig, as the CEO of this company.
The spin-off will be finalized at an extraordinary general meeting of shareholders on August 14. The effective date of the split for each new company is October 1.
This spin-off decision is part of the 'management efficiency' efforts emphasized by NCSoft co-CEO Park Byung-moo. NCSoft has faced continuous 'crisis' concerns due to deteriorating performance over recent years. The revenue decline of the ‘Lineage’ series, which had been a solid cash cow, continued, and the highly anticipated title ‘Throne and Liberty (TL)’ effectively failed at the box office, leading to poor financial results. The first quarter of this year also showed no improvement, with consolidated sales of KRW 397.9 billion and operating profit of KRW 25.7 billion, representing decreases of 17% and 68%, respectively, compared to the same period last year.
At an online and offline briefing for all employees on the 9th of last month, CEO Park diagnosed the current situation, stating, "NCSoft rapidly expanded its organization and workforce during its compressed growth phase as a company with sales in the 2 trillion KRW range. Since the endemic phase, the overall game industry has entered a stagnation period, and our main genre, MMORPG, is experiencing intensified market competition, making these times even more challenging."
CEO Park also emphasized the need for the spin-off, saying, "Compared to similar companies in the industry, NCSoft has relatively many employees and a high concentration at headquarters. Having many functions concentrated at headquarters imposes constraints on efficient and swift decision-making."
NCSoft is also pursuing the sale of its old office building in Samseong-dong, Seoul, to overcome its poor performance.
The biggest obstacle to the spin-off is employee opposition. Employees are concerned that transferring to the new subsidiaries will change their employment contracts and create uncertainty regarding labor union succession, potentially leading to layoffs.
In fact, the NCSoft labor union ‘Uju Jeongbok’ issued a statement earlier this month demanding, "Stop fostering a sense of employment insecurity and withdraw the unilateral spin-off plan."
The union stated, "NCSoft is in crisis because of a lack of leadership and failure to create engaging games, yet the management treats employees merely as 'disposable resources' and 'cost reduction factors,' with no accountability from executives."
They added, "If efficiency, transparency, and responsibility are truly improved, the directive to eliminate existing tasks and find new ones independently raises suspicion that the spin-off is intended as a pretext for layoffs."
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