Naver will consider company benefits in deciding on selling Line shares: CEO

While the Japanese government is pressuring Naver to shed ownership in Line, the dominating messaging app in Japan, the Korean internet giant said it will make a decision based on the benefit of the company's business, the chief executive officer said Friday.

During an earnings call, Naver CEO Choi Soo-yeon said the administrative guidance issued by Japan's Ministry of Internal Affairs and Communications last month, demanding Tokyo-based LY Corp., the operator of Line, to lower its dependency on Naver following a data breach incident was unusual.

“The administrative guidance on calling for a sell down of the equity holdings is considered something quite extraordinary, basically,” Choi said.

The Japanese government's move came after about 510,000 pieces of personal information involving Line users, business partners and employees were leaked through Line's subcontractor Naver Cloud last year. The messaging app is used by about 70 percent of the Japanese population.

LY Corp. is owned by A Holdings, a 50-50 joint venture between Naver and SoftBank. A Holdings has a 64.5 percent stake in Yahoo Japan. Following the administrative guidance, SoftBank is reportedly making moves to acquire Naver's stake in LY Corp.

“But regardless of this aspect, it’s not about whether we comply with that guidance or not. I think what's important is that we make this decision and review this aspect from the mid- to longer-term business plan the company has," Choi said.

The CEO said the company is working closely with government entities of both Korea and Japan, and it will announce its position after it finalizes a decision.

Meanwhile, Naver achieved a record-high operating profit of 439.3 billion won ($322.2 million) in the first quarter this year, up 32.9 percent on-year, the company reported in a regulatory filing. The sales posted at a record 2.52 trillion won, increasing 10.8 percent when compared to the first quarter of last year.

"We carried out business portfolio reorganization in early April and are concentrating on exploring new business opportunities by quickly responding to the changing market," Choi said during an earnings call for Q1.

"We will provide a unique user experience with our critical technologies including artificial intelligence, data and search engine, and further strengthen our competitive edge by developing new technologies."

The market consensus for the tech giant's earnings was 389 billion won in operating profit and 2.49 trillion won in sales, as compiled by Yonhap Infomax.

From its search platform business, the company grew 6.2 percent on-year. The growth was backed by sales improvement in search ads and the introduction of bidding for local ads, the company explained.

In the cloud business, Naver achieved sales of 117 billion won, up 25.5 percent on year.

"We will continue to introduce more custom options for companies to adopt AI in their work," Choi said. "We will also concentrate on introducing and improving the generative AI technology and adopt them in all Naver's services, including webtoons."

In the commerce segment, the company saw the revenue increase by 16.1 percent on-year to reach 703.4 billion won, backed by a new revenue stream including the Guaranteed Delivery and Brand Solutions, as well as the acquisition of Soda, operator of Japan's largest limited-edition trading platform Sneaker Dunk.

Membership revenue has also continued to grow on member and active user growth, Choi explained.

The fintech business also grew 11.2 percent on-year to log 353.9 billion won.