Layoff concerns linger as Kakao reshuffles staff structure

Kakao's office in Pangyo, Gyeonggi [YONHAP]

Kakao is relocating employees from its money-losing affiliates, a move sparking speculation the IT firm will soon make layoffs.

Kakao Enterprise, a Kakao subsidiary that offers artificial intelligence (AI)-based cloud services to companies, is undergoing a reshuffle, a Kakao Enterprise spokesperson confirmed on Monday.

Although Kakao Enterprise's revenue increased 71 percent on year to 163.3 billion won ($124.7 million) last year, its operating loss substantially increased to 140.5 billion won compared to 2021's 90.1 billion.

The reshuffle aims to redistribute its Kakao Enterprise workforce to other subsidiaries. Kakao Enterprise is accepting applicants regardless of their career experience or department and says the program is not “compulsory,” but employees are concerned the company is prepping itself for employee turnover.

Last month, Kakao Enterprise separated its primary business division in cloud and search engines to be “company in company,” or CIC, in which a company allows a certain business unit to run independently within the mother company, much like a corporate venture.

Media outlets speculate the move to be part of Kakao Enterprise’s effort for a rebound in its earnings.

“Kakao is attempting to efficiently manage business costs,” said Kakao’s Chief Investment Officer (CIO) Bae Jae-hyun at the conference call for first quarter earnings last month. “We are trying to restructure businesses with low competitiveness in its sector.”

However, a Kakao Enterprise spokesperson denied the reshuffle contains a redundancy plan.

“There is no compulsion we give to employees to sign up for the program or [to accept] forced retirements,” the spokesperson said. “But it is open to everyone [and] there is no due date or designated number of employees for the reshuffle.

“We are only trying to give better career opportunities for our employees. Those who wish to stay in Kakao Enterprise will continue to do so.”

Kakao Entertainment is also letting go of employees through its redundancy program dubbed “Next Chapter,” which offers advanced basic salaries and severance pays to employees with more than a decade of work experience. It was seen as part of Kakao Entertainment’s move to cut down on costs due to lack of revenue streams from some of its business divisions.

Kakao Entertainment's revenue jumped 47 percent a year to 1.3 trillion won in 2022, but operating profit decreased 59 percent to 25.8 billion won.

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]