Hancom challenges Microsoft in office programs

If there is a South Korean word-processing developer that can take on the almighty Microsoft Word in the local market, it would be Hancom.

The Kosdaq-listed Hancom is the only company here that develops the Korean word processor Hangul.

And its presence continues to grow in the local word processing scene, especially after Hancom was exclusively selected by the Gyeonggi Provincial Office of Education last June as the lead provider of Office suite programs.

Microsoft is clearly the leader and consumers’ first choice in using Word, along with the software tech giant’s other processors in its Office suite such as PowerPoint, Excel and OneNote for electronic documentation.

However, Microsoft has seen its market share in Korea’s office software sector decrease from 80 percent in 2013 to about 70 percent last year. Meanwhile, Hancom has over 28 percent in market share, up from 19 percent during the same period, according to Hancom’s financial statements. 

Analysts expect the deal with the Gyeonggi Office of Education to pave the way for Hancom to be further selected by other regional offices and agencies as the lead provider of office programs including cloud computing services.

“There are expectations that the other 16 regional education offices could choose Hancom, enabling it to boost the company’s sales,” said Park Jong-sun, an analyst at Eugene Investment & Securities.

Hancom will be able to see its sales increase by 20 billion won ($18 million), if all of the education offices change and use its office programs, he noted.

Hancom posted a consolidated operating profit of 9.4 billion won in the second quarter of this year, up 1.3 percent from a year ago, on sales of 26.5 billion won, up 17 percent, according to its regulatory filing.

Its earnings were in line with market consensus of 25.3 billion won in sales and 9.5 billion won in operating profit.

Due to sales of its newly released Hancom Office NEO 2016 and iText, a software for PDF generation and manipulation, the Korean word developer was able to see its sales increase on-year. Hancom acquired iText last year, and seeks to list it on the London stock market next year.

Also, its plan for global expansion with its Office suite is expected to boost the company’s valuation.

Last year, the company sealed deals to provide its programs to companies in China and Argentina, and seeks to further make inroads into markets such as India and Russia this year.

“Should it further secure export deals in the latter half of this year, the company’s valuation is likely to be rerated,” said Kim Hyun-seok, an analyst at Shinhan Investment.

By Park Hyong-ki (hkp@heraldcorp.com)

This is the 17th in a series of articles analyzing major companies by market capitalization traded on the tech-heavy KOSDAQ market. -- Ed