Korea IBM (the Korean subsidiary of IBM) sent more than 47.557 billion won in dividends to its parent despite posting a loss in 2024, but it did not pay dividends last year after returning to profit. On the surface, it is an unusual pattern of "paying dividends in the red but not paying them in the black."
There are three main reasons. A large dividend the previous year reduced the pool for dividends; last year, the core business's profitability deteriorated sharply; and the swing to net profit was driven more by lower tax expense than by better operations. As global IBM reshapes its business around artificial intelligence (AI) and Hybrid Cloud, some suggest the Korean unit may have prioritized retaining cash internally over dividends with organizational and business restructuring in mind.
◇ Posted a profit, but the pool for dividends was not ample
According to Korea IBM's 2025 audit report on the 5th, the company did not pay dividends last year. On a consolidation basis in 2025, Korea IBM swung to a net profit of 12.242 billion won. Although Korea IBM posted a consolidated net loss of 8.478 billion won in 2024, it paid 47.557 billion won in dividends that same year to its parent, IBM Korea Holdings B.V. The payout ratio then was 187.6%, and the dividend per share was 9,380 won. The dividend size was 5.6 times that year's net loss.
Paying dividends despite a loss is not impossible. Even if a company records a loss that year, it can use retained earnings accumulated in the past as a source for dividends. Korea IBM's retained earnings at the start of 2024 were 86.427 billion won.
However, the coffers shrank after the dividends. Korea IBM's retained earnings fell to 30.651 billion won at the end of 2024. Although retained earnings rose again to 43.829 billion won last year on the back of net profit, not all of that money can be used for dividends. Of the 43.829 billion won in retained earnings at the end of last year, 16.729 billion won was legal reserves. Legal reserves are funds the company must set aside by law and cannot be used as cash for dividends. Even after returning to profit, it was structurally difficult to repeat dividends on the scale of the previous year.
Of course, that does not mean dividends were entirely off the table. Some dividends may have been possible within the 27.1 billion won of undistributed retained earnings. It appears, however, that Korea IBM chose to keep the money inside the company rather than pay it out as dividends last year.
◇ Net profit in the black, core operations worsened
The more important issue is the core business. Korea IBM swung to a net profit last year, but its actual operating performance deteriorated significantly. Last year's revenue was 532.274 billion won, down 10.2% from a year earlier. Operating profit was 1.96 billion won, a 91.4% plunge from the previous year's 22.975 billion won. The operating margin fell from 3.9% to 0.4%.
The revenue decline did not appear in only one area. Infrastructure revenue fell from 347.84 billion won to 308.61 billion won. Software revenue decreased from 117.53 billion won to 110.7 billion won, and consulting revenue declined from 108.84 billion won to 94.91 billion won. Both merchandise and service revenue fell.
Expense pressures also grew. In particular, restructuring expense increased sharply. Korea IBM's addition to provisions for restructuring soared from 1.89 billion won in 2024 to 11.266 billion won last year. Provisions for restructuring reflect in advance expenses to be incurred for workforce adjustments or organizational overhauls. Although wages and employee benefits fell, the increase in additions to provisions for restructuring pushed total employee compensation up from 117.11 billion won to 119.72 billion won.
◇ The swing to profit also owed much to "tax effects"
It is hard to say the return to profit last year was solely because the core business improved. Korea IBM's profit before income tax expense was 14.903 billion won last year, down from 18.692 billion won a year earlier. Profit before taxes decreased, yet the final net profit turned positive.
The difference came from income taxes. Korea IBM's income tax expense fell sharply from 27.17 billion won in 2024 to 2.661 billion won last year. Pre-tax profit declined, but the tax burden plunged, sending the final net result back into the black. The 2024 loss was not solely due to weak operations either. At that time, Korea IBM was in the black before income taxes. But the recognition of 22.457 billion won in additional income tax pushed the effective tax rate up to 145%. As a result, a net loss occurred.
Last year, by contrast, past income tax adjustments were recognized as a reversal, sharply reducing income tax expense. Accordingly, the effective tax rate fell from 145% in 2024 to 18% last year. In the end, both the 2024 loss and last year's profit were driven more by tax factors than by the company's operating prowess.
◇ Korea IBM embraces HashiCorp… chose restructuring over dividends?
Korea IBM also carried out business restructuring last year. In September last year, the company acquired 100% of the shares of HashiCorp Korea Co., Ltd., making it a subsidiary, and in October last year, it merged it through absorption. HashiCorp Korea provides software for automating multi and Hybrid Cloud infrastructure. In the audit report, Korea IBM said it expected "enhanced competitiveness in the software sector" and "synergy effects with the existing portfolio" from the acquisition. The global trend of IBM strengthening its AI and Hybrid Cloud businesses can be seen reflected in the Korean unit.
However, it is difficult to conclude that acquiring HashiCorp Korea directly caused the sharp drop in operating profit. In the audit report, the acquisition was treated as a business combination under common control. The book value of net assets acquired was 641 million won, the transfer consideration was 1.37 billion won, and the 729 million won difference was recognized as an acquisition loss in other equity.
It is also hard to say dividends were halted due to a cash shortfall. At the end of last year, Korea IBM's cash and cash equivalents were 146.843 billion won, up about 31.3 billion won from the end of the previous year. Net cash flow from operating activities also rose from 14.846 billion won to 49.237 billion won. Ultimately, Korea IBM's no-dividend stance appears to reflect not a simple cash shortage but a combination of a reduced pool for dividends, worsening core profitability, higher restructuring expense, and business reorganization. For foreign IT corporations' Korean subsidiaries, dividends are typically used as a means to send profits to headquarters.
An IT industry official said, "Korea IBM succeeded in swinging to a net profit last year, but operating profit fell below 2 billion won. The quality of the profit also relied heavily on the decrease in tax expense," adding, "As IBM reshapes its business around AI and Hybrid Cloud, the Korean unit may, for the time being, prioritize internal retention and organizational and business restructuring over dividends."
A Korea IBM spokesperson said, "Beyond what has been disclosed, there are no additional facts we can confirm."