Handset maker goes belly-up

VK Corp., a mid-sized Korean maker of mobile handsets, went bankrupt yesterday after defaulting on promissory notes worth 1.78 billion won ($1.9 million). The company teetered on the brink of insolvency on June 26 and 27, having defaulted on respective amounts of 3.5 billion won and 2.8 billion won, but both times managed to settle them the next day. However, its creditor banks declared it insolvent after it failed to repay maturing debts by yesterday. Most makers of handsets have been seeing their profits vanish recently. Just before the Kosdaq market halted VK stock trading on Thursday as rumors swirled over its impending bankruptcy, the company’s market cap stood at around 40 billion won. The company will be de-listed on July 22. According to the cell phone producer’s quarterly report, retail investors held about 85 percent of the shares as of late last year, but the portion is almost certain to have risen, as foreign and institutional investors have sold off huge blocks. Apart from stock investors, the business’s collapse will badly hurt its 170 parts suppliers, as well as its creditors, who have lent it 10 billion won. Those companies include SK Telecom, National Agricultural Cooperative Federation and Industrial Bank of Korea. Starting out as a secondary battery producer in 1997, VK jumped into the mobile handset business in 2001, churning out phones operating on the European mobile platform, which accounted for more than 80 percent of the market at the time. Bolstered by the move, VK maintained years of consecutive brisk growth, posting 140 million won in sales revenue, along with 27 billion won in operating profit, in 2002; its sales in 2004 approached 400 billion won. The company also enjoyed high overseas demand: Sales from its export partners in China, Europe, Southeast Asia and America accounted for almost 70 percent of its entire revenue. However, the company began faltering last year, posting an operating loss of 5.8 billion won and a net loss of 65 billion won ― mainly due to its takeover of the French mobile handset maker VMTS at 100 billion won, done ostensibly for research and development, and its excessive budget for the development of its latest slim phone, the X100. With people wanting slimmer handsets that offer multiple functions, R&D expenditure for phone makers have been snowballing, said Lee Seung-hyuk, an analyst ay Woori Securities Co. by Seo Ji-eun