Get Wider, Be Closer NHN Annual Report 2010

Transcription

NHN Annual Report 2010
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Get Wider, Be Closer
Connect
Connect
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000 / 001 /
CONTENTS
002 NHN CI
004 GET WIDER, BE CLOSER
006 ACCOMPLISHMENTS IN 2010
020 2010 AT A GLANCE
022 2010 FINANCIAL HIGHLIGHTS
024 CEO LETTER
028 BOARD OF DIRECTORS
030 VISION & CORE VALUES
032 SERVICE OVERVIEW
NAVER
HANGAME
MOBILE NAVER
ME2DAY
JR. NAVER
HAPPYBEAN
HANGAME JAPAN
NAVER JAPAN
LIVEDOOR
IJJI.COM
042 BUSINESS OVERVIEW
SEARCH ADVERTISING
DISPLAY ADVERTISING
ONLINE GAME
GLOBAL BUSINESS
054 FINANCIAL REVIEW
100 AFFILIATES
102 CORPORATE HISTORY & AWARDS
104 SUSTAINABILITY
112 INVESTOR INFORMATION
The corporate identity (CI) of Next Human Network (NHN)
encapsulates all the values associated with the word
"connectivity."
A world that keeps us in touch with our loved ones, shares
information at the click of a mouse, and connects us with
people living far away.
NHN: Creating a world in which everyone is
connected to everyone.
Connect
002 / NHN CI
003 /
/
Get Wider, Be Closer
NHN has created an exciting new world of expanded markets,
endless services, and open and easily-shared technologies,
helping people to communicate their information and
knowledge quickly and seamlessly.
Our constant innovations act as bridges that connect
people to the future and bring them in touch with
the world around them.
Connect
People who want to be one with the world and in touch
with the future choose NHN—the company that brings
the Internet to life.
004 / Get Wider, Be Closer
005 /
Korea’s No.1 Search Portal /
/
Leading Korean Online
Advertising Market /
NHN’s healthy results in 2010 reflect its role as Korea’s premier Internet
provider. We held over 70% of the country’s search engine market,
and were constantly introducing new search and convenience features.
We also led the online advertising market by adding to our range of
search ads and reorganizing our display ads. Our efforts to secure
future growth engines included enhancing our mobile and social
networking services and investing KRW 100.0 billion in the smart
devices game sector.
Strengthening Online Game
Capabilities /
Connect
Bolstering Mobile and SNS /
Solidifying Global Business /
Contributions to Society /
006 / Accomplishments in 2010
We enhanced our overseas operations with the growth of Naver
Japan and Hangame Japan and the acquisition of "livedoor." Finally,
we fulfilled our corporate social responsibilities through such social
contributions formats as Happybean, the NHN Cultural Foundation, and
our in-house community service group, "N'Gels." We are committed
to developing Korea’s Internet industry through profit-centered
management and a policy of caring for and sharing with the less
fortunate.
007 /
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74.7%
Search
Market Share
NHN’s reputation as Korea’s premier Internet search portal flows from its ongoing innovations and
its dedication to user convenience.
Our search portal, Naver, which was the country’s top player in terms of service quality and traffic in 2010, made monumental
strides in adding to the quality of its search services and developing new and innovative ones. Its efforts to build ever more
creative search services to cope with rapid changes in the Web environment included Real-time Search, Sequence Search
(which enables users to find information through search optimization technology), and Social Network Search (which trolls
for information contained in blogs, Internet cafes, and "me2day," a micro-blogging service). It also enabled visitors to
experience a wider world of information searches, mainly by reorganizing its maps (including "Street View" and "Aerial
View") and introducing "Theme Cast" for such topics as sports and the economy. In addition, we opened up a personalized
web environment called "Naver me," an individualized home page base that combines "N-drive" online storage with a
personalized web service and SNS.
(KoreanClick, as of December 2010, Total Time-spent)
Connect
29,600,000
No. of Monthly
Unique Visitors
(KoreanClick, as of December 2010)
008 / Korea’s No.1 Search Portal
009 /
/
KRW 838.7 billion
Search Ad
Revenue
NHN continued to be the leader of Korea’s online advertising market in 2010 by adding to its search ads and
revamping its display ads.
We seized the initiative in online advertising innovations by providing our own search ad, "Click Choice," to the Auction,
Gmarket, and Best Buyer web sites, thereby increasing the reach of our search ad business. We began carrying out our own
"PowerLink (Mobile)" mobile search ads on m.search.naver in September, and started implementing a fee-based service in
November. As a result of these efforts, we increased our search ad revenue and our number of advertisers by 21% and 26%,
respectively, over the year. We also revamped our display ad business. This included realigning our sales policy for display ads.
In addition, we shifted from a flat-unit pricing scheme to a customer-oriented, customized one that changes by time zones
and seasons, enabling our customers’ ad campaigns to be executed in a more flexible manner. This led to a rise in display ad
revenue and a dramatic diversification of our customer base, which now ranges from large advertisers to small and mediumsized ones.
(Note: NHN's online ads are operated by NHN Business Platform, which was spun off from NHN in May 2009.)
(FY2010, Pre-spin-off)
Connect
KRW 238.0 billion
Display Ad
Revenue
(FY2010, Pre-spin-off)
010 / Leading Korean Online Advertising Market
011 /
/
KRW 100 billion
in
Mobile Games for
Smart
Devices
Planned Investment
Hangame, NHN’s online game portal, added to its portfolio and reinforced its publishing capabilities.
It also introduced four titles (TERA, MetroConflict, ASTA, and Kingdom Under Fire II) at "G-Star 2010," Korea’s largest game
exhibition, in November, creating an industry sensation and enthralling gamers. The blockbuster-level "TERA" won praise
from gamers for its breakthrough technologies and graphics, leading to its successful commercialization in January 2011.
In November, we introduced PlayNet, a new game channeling site. Offering a game search feature and specialized content
from online game webzines, it enhances user convenience by enabling Naver ID holders to enjoy games without the need for
separate memberships. We also decided to invest KRW 100 billion in the mobile game business for smart devices over the
next three years. This will include creating an in-house development studio and establishing a game developer, Orange Crew,
allowing us to gain an early edge in the rapidly-growing smartphone game market in Korea and Japan.
Finally, we will continue enriching Hangame, in which users can enjoy games regardless of platforms (including PCs and
mobiles), while fostering the smartphone game business and leading its growth in both Korea and Japan.
Connect
160,000
of Peak Concurrent
No.
"TERA" Users
(As of January 2011)
012 / Strengthening Online Game Capabilities
013 /
/
No.1
Mobile Search
Market Share
NHN is developing a host of new growth engines by enhancing its mobile and social networking services.
Our industry leadership is particularly strong in the rapidly-growing mobile and social networking areas. In order to
maintain this market dominance and increase the competitiveness of our content in these areas, we have expanded our
services significantly. Naver retained its No. 1 position in the mobile search market, with its mobile traffic numbers enjoying
unprecedented growth. In December, for example, its number of unique visitors and page views increased by 2 times and
almost 20 times, respectively, from the year before. Naver Mobile (m.naver.com) offers 21 services, including email, searches,
news, and dictionaries. It also boasts 13 applications, the largest number among Korea’s portals. According to a Mobile
Internet Index survey conducted by "Metrix," a local market researcher, in October 2010, Naver’s applications ranked first in
user satisfaction among all Korean mobile applications. In the social networking area, we revamped Naver me, Naver talk, and
me2day, turning them into Korea’s "Top 3" social communications services. me2day boasted more than 4 million users at
the end of 2010. We plan to roll out even more exciting services in the mobile and social networking areas in the future.
Connect
4,000,000
No. of me2day
Members
(As of December 2010)
014 / Bolstering Mobile and SNS
015 /
/
61 million
No. of
Monthly Page Views
on Naver Japan
The ongoing growth of Naver Japan is giving our global business an opportunity to take off in full scale.
Naver Japan has been enjoying continuous growth by increasing its inflow of local users through "Matome," its user
participation service, and offering a mobile search service. As a result, its number of unique visitors and page views were
6,870,000 and 61 million, respectively, as of December 2010. Its business capabilities were consolidated further by acquiring
the "livedoor" portal in May 2010. By joining with livedoor, which has 9 million members and rich content in many areas,
Naver Japan was able to grow an extensive user base and a wealth of quality content. Naver Japan cooperates actively
with livedoor. For example, they share Naver Japan’s search engine, which has been optimized for searches in Japan. Going
forward, Naver Japan will continue to augment its search and portal services to become a full-fledged "curation platform"
that shares and distributes information and knowledge, making a significant contribution to the growth and expansion of
NHN’s global businesses by working closely and cooperatively with NHN Japan.
(Neilson Netratings, as of December 2010)
Connect
6,869,000
No. of
Unique Visitors to
Naver Japan
(Neilson Netratings, as of December 2010)
016 / Solidifying Global Business
017 /
/
KRW 23.0 billion
Total Value of
Donations from
Happybean
NHN wants to help create a happier and healthier world that is filled with hope.
In 2010, Happybean, an online donation portal that we operate in conjunction with the Happybean Foundation, played
a leading role in helping our neighbors in need through a variety of platforms, such as Happylog, Happybrand, and Bean
Bank. About 29 million netizens participated during the year, raising KRW 7.4 billion to help the less fortunate everywhere—
including in Haiti and Africa. Our efforts won us plaudits around the world. For example, our "Happybean Energy" campaign
won the "Promo & Activation Lions National Diploma" award at the Cannes Lions International Festival of Creativity, while our
"Beauty in Every Letter" campaign received the "PR Silver Lions" prize. Some of our other efforts to grow with our society
included opening a library for the use of the public in our "Green Factory" office building to strengthen our ties with local
communities. We also sponsored an ongoing exhibition called "Dialogue in the Dark." Carried out by "N-Visions," our social
enterprise group, its goal is to facilitate the employment of the differently challenged and increase people’s awareness of
their needs.
(From 2005 to 2010, Total Amount)
Connect
6,000,000
No. of donors
(From 2005 to 2010, Total Amount)
018 / Contributions to Society
019 /
March
April
July
September
October
November
Naver carries out
"My Competitiveness" ad campaign
Naver launched a new ad campaign, called
"My Competitiveness," in March. Its message
was that its innovative and differentiated
services can help make the lives of its users
happier, more meaningful, and better
organized. The campaign focused on the
advantages of utilizing "Knowledge-iN,"
Naver’s knowledge-sharing platform. By
doing so, users can pose questions to and
receive answers from over 2,200 specialists,
including doctors, lawyers, and attorneys.
Some of its other features include an
"Automobile Smart Finder" and "Naver
N-Drive," a ubiquitous storage service.
Moves into new
"Green Factory" office building
NHN moved into its new office building,
the "Green Factory," in Bundang, Gyeonggido. Conceived as "a green factory that
produces knowledge," the building has
27 stories above-ground and eight below,
with a total floor area of 101,661 square
meters. About 2,900 employees of NHN and
its affiliates work in it. It boasts a wide range
of business and supplementary facilities,
Merges NHN Games with Webzen
NHN Games, in which NHN held 6 million
shares and a 46.88% stake, and Webzen
carried out a corporate merger at the merger
ratio of 1.57262712 Webzen shares to one
common share of NHN Games, allowing
NHN to secure 9,435,762 shares and a 28.5%
stake in Webzen. As a result, NHN became its
largest shareholder.
Introduces Naver mobile search ads
The NHN Business Platform added its
own search advertisement product, "Click
Choice," to results from Naver mobile
searches (m.search.naver.com). The
advertisement area, called "PowerLink
(Mobile)," enables advertisers to utilize
their ad opportunities in a new and different
search setting by placing them in the mobile
environment.
Gains control of Wise Cat, developer of
the "Slugger" online baseball game
NHN gained control of Wise Cat, the
developer of the online baseball game
"Slugger," by acquiring 51% of its shares.
This enabled the company to strengthen
Hangame’s publishing business by ensuring
that it has a stable sports game lineup. It
also added to its potential for advancing into
overseas sports game markets.
Hosts DeView 2010 developers conference
The third NHN DeView 2010, a conference
aimed at sharing NHN’s technologies with
developers, was held at the InterContinental
Seoul Coex on September 8. More than
2,000 participants from across the country,
ranging from high school students to
developers, heard about policies to expand
Naver’s open API and other topics, as well as
development processes. The company’s hope
was that the conference would enrich users’
service experiences and increase developers’
business opportunities.
Sells stake in OAL overseas subsidiary
NHN’s overseas subsidiaries, NHN Global
and NHN PCCS-HK, sold all their shares
(about 55%) in their joint venture, Ourgame
Asset (OAL), to Beijing Wei De Wo Fu
Investment Consulting (WDWF). OAL
operates Ourgame, a Chinese online game
portal.
Starts "PlayNet" channeling service
NHN started PlayNet, a channeling site, on
November 16. It enables users to enjoy a
variety of games, from MMORPGs to sports,
with a single Naver ID and without having to
become a member. It has offered 21 games
since its opening, along with a wide range
of games-related data, such as specialized
content from webzines and information on
SNS. By linking with well-known domestic
games and others by smaller developers,
NHN enables games to be evaluated by their
characteristics alone, not the companies that
developed them, while helping small- and
medium-sized game developers to attract
more traffic through outlinks on game
information.
including eco-friendly offices.
Establishes NHN Search Marketing
The NHN Business Platform (NBP)
established NHN Search Marketing (NSM)
with an initial capitalization of KRW 500
million to engage in the search ad marketing
agency business by investing KRW 8.0 billion
in it. NSM provides optimal consulting
and services for ad operations, support
for bidding, and analyses the effects and
optimization of ads so that advertisers
can place their search and local ads more
effectively.
Issues non-guaranteed bonds worth
KRW 100 billion
NHN (which had previously received an
"AA- (Stable)" rating from Korea’s leading
credit rating agencies, NICE Investors Service
and Korea Investors Service) issued KRW
100 billion worth of 3-year public placement
bonds. This was done to facilitate the
company’s future financing efforts in capital
markets both at home and abroad.
August
Launches Naver App Factory
open beta service
NHN launched the Naver App Factory
open beta service to enhance its social
applications. It enables outside developers
to register and manage applications that
can be installed on blogs, cafes, and
Naver’s me2day services by using the Naver
application programming interface (API).
NHN aims to create a virtuous cycle through
the development of a variety of social
applications, allowing developers to add
to their business opportunities and profits
by utilizing Naver’s extensive user base and
helping users enjoy enriched Web activities
through a wider variety of choices.
April
May
NHN Japan acquires "livedoor"
NHN Japan signed a share purchase
agreement for livedoor with Livedoor
Holdings of Japan. This was followed by
acquiring its subsidiaries, Jlisting, Livedoor
Career, and Adwires the following May.
Livedoor, which operates www.livedoor.com,
is a Tokyo-based Internet and mobile services
provider that was established in 2003. It
boasts strengths in media and blogs, as well
as a wealth of content in such areas as news,
culture, and finance.
Establishes Game Marketing & Business
NHN established Game Marketing &
Business (GMB), investing KRW 500 million
to boost online game revenue from Internet
cafés and enhance its business opportunities.
The new entity will be tasked with Internet
café marketing and sales for Hangame in
Seoul and Gyeonggi-do. The move will allow
the company to continue providing top-ofthe-line services to Internet cafés.
020 / 2010 At a Glance
Opens Social Apps,
Naver’s social apps store
NHN opened Naver’s social application
store, "Social Apps," featuring about 40
kinds of apps, including social games,
communications, and utilities. It enjoyed
revenue of KRW 100 million in its first month,
while introducing 52 applications and
recording 900,000 downloads. This vigorous
growth, which will result in increased earnings
by developers, will contribute dramatically
to the evolution of a healthier and sounder
Internet ecosystem.
021 /
Connect
Launches iDoGame service
iDoGame, an open market for online games
provided by Hangame, introduced more
than 40 different games, including puzzles,
actions, and simulations, by launching an
open beta service. It is also going to reveal
the development source code of its popular
casual game, "Sachunsung." In its remake
version, Sachunsung will allow users to
access an unlimited number of games and
30 kinds of new maps. They will also be able
to convert many maps for free.
December
Launches Naver me open beta service
Naver launched an open beta service called
"Naver me." Combining a personalized web
environment with a social networking service,
it enables users to find updated information
on blogs, Internet cafes, me2day, and other
venues, and access new blog entries by their
friends. They can also generate and distribute
information by managing personalized
services, such as email, housekeeping books,
and N-Drive, in one place, and subscribe to
a wide variety of content, including news,
sports, and movies.
Balance Sheet Summary
Annual Revenue (Billions of KRW)
(Units: Billions of KRW, %)
Pre-spin-off
FY2009FY2010
YoY
FY2009
FY2010YoY
100
1,515
1,357
Total Assets
1,393.2 1,798.3 29.1%
1,304.9 1,720.3 31.8%
Total Liabilities
409.7 432.2 5.5%
321.4 354.2 10.2%
983.5 1,366.1 38.9%
983.5 Total Shareholders’ Equity
1,800
Post-spin-off
Composition of Annual Revenue (%)
422
1200
207
1,366.1 38.9%
600
1,237
447
693
839
447
15
50
145
150
36
51
16
12
55
737
632
32
51
11
56
25
0
Note: Pre-spin-off figures refer to figures prior to the spin-off of the NHN Business Platform in May 2009.
28
75
422
238
33
1,313
0
2009
2010
Pre-spin-off
2009
2010
2009
Post-spin-off
2010
Pre-spin-off
2009
2010
Post-spin-off
Other
Online games
Display ads
Search ads
Connect
Income statement summary
Pre-spin-off
YoY
FY2009
Revenue
1,357.4
Search Ads
692.6
838.721.1% 632.3 737.116.6%
Display Ads
207.2
238.014.9% 150.4 144.9-3.7%
Online Games
446.7
422.3-5.5%446.7422.3-5.5%
1,514.8 11.6%1,237.11,312.5
6.1%
10.9
Operating Expenses
816.9
915.012.0% 705.3 705.40.0%
Labor Costs
269.5
273.2 1.4%231.9214.2-7.6%
Commission Expenses
339.3
390.115.0% 336.0 376.312.0%
Advertising Expenses
20.9
34.765.5% 19.330.055.4%
Depreciation Expenses
49.6
77.856.8% 24.8 19.7-20.7%
Communication Expenses
54.2
57.05.2% 17.9 0.6-96.8%
7.7
8.37.8%
Other
83.4
82.3-1.3% 75.5 64.7-14.3%
Operating Income 540.5
599.811.0% 531.8 607.114.2%
39.8%
39.6%(0.2%p) 43.0%46.3%3.3%p
Operating Income Margins
Non-Operating Income
45.0
88.596.7% 52.4 83.359.0%
Non-Operating Expenses
39.2
44.212.7% 39.1 45.716.8%
Pre-Tax Income 546.3
644.217.9% 545.0 644.718.3%
Income Tax Expenses
124.6
150.020.3% 123.3 150.522.0%
Net Income
421.7
494.217.2% 421.7 494.217.2%
200
300
100
0
2010
Pre-spin-off
2009
2010
2009
Post-spin-off
Annual Online Game Revenue (Billions of KRW)
145
2010
2009
2010
Pre-spin-off
Post-spin-off
Annual Other Revenue (Billions of KRW)
600
21
447
422
447
16
422
400
14
200
7
0
0
2010
Pre-spin-off
023 /
150
0
2009
2009
2010 Financial Highlights
238
207
600
Note: Pre-spin-off figures refer to figures prior to the spin-off of the NHN Business Platform in May 2009.
022 / 300
632
FY2010YoY
Other
737
693
FY2009FY2010
15.844.9%
839
900
Post-spin-off
Annual Display Ads Revenue (Billions of KRW)
Annual Search Ads Revenue (Billions of KRW)
2009
2010
Post-spin-off
11
2009
2010
Pre-spin-off
8
8
2009
2010
Post-spin-off
/
Contributing to the development of
the Internet industry by adding to our
core services and developing new
and more innovative ones
Connect
024 / CEO Letter
025 /
Sang-Hun Kim
President and CEO
Dear valued customers and shareholders:
I want to tell you about Naver’s major results and performances in 2010.
"In 2010, NHN continued its record of solid growth. It did this by adding to its competitiveness in its core
"In 2011, we will continue to grow in terms of both quality and quantity by enhancing our core services
businesses and improving its management efficiencies."
and responding proactively to changes in our business environment."
Last year, NHN carried out a variety of service improvements to maintain its leadership in the PC/mobile
In January 2011, we replaced Overture’s search ad platforms with our own. I am pleased to report that our
convergence environment and strengthen the competitiveness of its core businesses, including searches and
number of advertiser sites has been increasing continuously, even after the separation, meaning that our future
games. This helped it record its best results ever. Revenue increased by 11.6% year-on-year to 1.5 trillion won at
competitiveness in the ad platform environment is assured. That same month, we opened our blockbuster
the end of the year (on a pre-spin-off basis). Operating income and net income grew by 11.0% and 17.2%,
MMORPG, "TERA," which we had been developing for more than three years. It received rave reviews, adding
respectively, to 599.8 billion won and 494.2 billion won.
dramatically to the value of our game portfolio.
The company’s efforts to strengthen its competitiveness in the search sector included enhancing their quality
During the year, we plan to continue enhancing our core offerings, with a special emphasis on social and mobile
and realigning them from the perspective of its users, so that they could access them more conveniently. In
services, which have been the most popular sectors in the Internet industry. We rolled out "Naver talk," our
addition, we reorganized Naver Cast so that a variety of in-depth content could be enjoyed with ease, and
wired and wireless integrated communicator, in February. Going forward, we will continue augmenting Naver’s
introduced Shopping Cast, which allows advertisers to edit data about their products quickly and easily. We also
social and search competitiveness by adding new components to our Social Network Search service. Our goal is
restructured our Unified Search service. For example, we launched Sequence Search, which helps users find the
to integrate 22 million active blogs and 7 million cafes with Naver’s search function, so that even greater
information they want without needing to know the right keywords. Finally, we enhanced the usefulness and
synergies can be achieved.
reliability of information provided by our searches by deploying the Social Network Sea rch service, which lets
users find the information they desire in conjunction with other people who share their tastes and interests.
We also announced our decision to offer open market-type services this year, after considering a variety of ways
of enhancing its competitiveness in the area of Knowledge Shopping. Because product information is one of
In the area of online ads, we carried out
a successful transition from Overture’s search ad
Naver’s most important functions, we decided that
providing product information through these
platform to our own. In the game business,
we concentrated on offering new game services.
types of services was the best way to bolster our
competitiveness in the search sector. Going
We endeavored to raise the scale of
completion of our games by conducting a wide
forward, NHN will provide users with even more
value-added services to help them find
Hangame had been preparing, such as the
product information, while continuing to build
range of tests on new games that
MMORPG blockbuster, "TERA." We also
carried out improvements to our web board-games
which sellers can post, describe, and sell their
more open market-type platforms on
products.
to enhance user satisfaction.
Finally, we will carry on with our social contribution activities in tandem with the Happybean Foundation and the
In addition, we took a number of steps to cope with the constantly-changing mobile environment. We
NHN Cultural Foundation, and strive to remain a well-respected and trusted company that is committed to
established Orange Crew, a smart devices game developer, to revamp our mobile game service. We also
open, ethical, and principled management. We also promise to continue enhancing value for our shareholders
diversified our business portfolios by launching PlayNet and providing pilot services for about 20 games. In the
by maximizing our corporate worth.
area of mobile searches, we introduced Real-time Search, and provided more sophisticated services for mobiles
by applying a function that shows search results by source at a glance. In addition to adding Mobile Shopping
As always, I look forward to your continuing support and encouragement.
Search and Location-Based Service (LBS) searches, we introduced CallLink, which enables users and businesses
to talk to each other by phone at no cost. We also launched Calendar and Address Book, which allow users to
Thank you.
export and import their schedules and address books on the Naver Web Calendar to and from their mobile
devices. Lastly, we maximized user convenience by enhancing the quality of our mobile services. This included
improving the functions of Mobile N-Drive, launching the Mobile Web Japanese Dictionary, and opening the
Mobile Movie service.
Sang-Hun Kim
President and CEO
We also posted meaningful results from our global business. For example, Naver Japan, which enjoyed solid
growth in its user base by offering such services as Matome and N-Drive, reorganized its home page and
replaced its search engine. It also applied its Image Search to "livedoor," which it acquired in the first half of the
year, and replaced livedoor’s search engine with its own. This improved the quality of its searches dramatically,
so that the content of livedoor’s blogs can also be fully reflected in its search results. In addition, we continued
with our efforts to enhance synergies between the two companies through the integration of user IDs, meaning
that Naver Japan’s services can now be accessed using livedoor ID’s.
026 / CEO Letter
027 /
/
/
Inside Directors
Outside Directors
Sang-Hun Kim
Hae-Jin Lee
In-Joon Hwang
Jae-Seung Yoon
Gyeong-Hoon Boo
Hyun-Soon Do
•CEO, NHN Corporation
•Chairman of Board, NHN Corporation
•CFO (Chief Financial Officer),
•Outside Director, NHN Corporation
•Chief Director of Business Management,
•CSO (Chief Strategy Officer),
NHN Corporation
•Member of Audit Committee,
NHN Corporation
NHN Corporation
•Managing Director, Woori Investment &
NHN Corporation
NHN Corporation
NHN Corporation
•Business Management Advisor,
Securities Co., Ltd.
•CEO & Vice President, Daewoong Co., Ltd.
•CEO, Charon Partners
•Executive Director,
NHN Corporation
•CEO, Navercom
•Woori Finance Holdings Co., Ltd.
•CEO, Daewoong Pharmaceutical Co., Ltd.
•Member of Hanmi Venture Capital
Gallery Hyundai Co., Ltd.
•Vice President of Legal Division,
•Samsung SDS
•Credit Suisse Securities
•Prosecutor, Seoul Central District
LG Corporation
•MS in Computer Science, KAIST
•MBA, New York University
Prosecutors Office
•Korea Technology Investment Corporation
Securities (Seoul)
•BA in Law, Seoul National University
•BA in Business Administration,
•McKinsey & Company (Seoul)
Seoul National University
•Peregrine Securities (Hong Kong)
•Judge, Intellectual Property Department,
Corporation
•Member of Lehman Brothers International
Seoul District Court
Joon-Ho Lee
Hwi-Young Chae
•Judge, Seoul District Criminal Court
•COO (Chief Operating Officer),
•CEO, NHN Business Platform Corporation
•Bank of Korea
•LLM, Harvard University
NHN Corporation
•BA in International Economics,
•CAO (Chief Advisory Officer),
•Managing Director of Domestic Business,
Seoul National University
NHN Corporation
NHN Corporation
•CTO (Chief Technology Officer),
•Head of Naver Division, NHN Corporation
NHN Corporation
•YTN
•Associate Professor, Soongsil University
•Yahoo Korea LLC.
Dept. of Computing & IT
•BA in English Language and Literature,
•Ph.D. in Computer Science, KAIST
Sogang University
/
• Current post
• Past work experience
Connect
Hae-Jin Lee,
Sang-Hun Kim,
Joon-Ho Lee,
In-Joon Hwang,
Hwi-Young Chae,
Jae-Seung Yoon,
Gyeong-Hoon Boo,
Hyun-Soon Do,
CSO
CEO
COO
CFO
CEO of NBP
Outside Director
Outside Director
Outside Director
028 / Board of Directors
029 /
/
/
Vision
Core Values
NHN is enriching people’s lives by creating a networked world
filled with fresh ideas.
NHN believes in the value of change, passion, and challenge.
As a company that is dedicated to change and fresh new ways of thinking,
NHN has declared creativity and innovation, challenge and passion, modesty,
and a sense of ownership to be its core values.
Innovations that are based on creative thinking always lead to change.
Taking on challenges with passion is a driving force behind enterprise development.
Modesty and a sense of ownership are the bases of trust.
NHN wants to be a company that is trusted and respected by the communities it
serves. It will do this by sharing and practicing these core values with its employees.
Our goal is to develop an online environment that is radically different in concept.
By creating a new culture and improving the quality of life through values that
extend beyond the Internet, we will do our best to ensure that people enjoy
happier and healthier lives.
Core Values
Connect
Sense of
Ownership
Innovation
Creativity
Challenge
Passion
030 / Vision & Core Values
031 /
Modesty
/
Service Overview
NHN offers a wide range of services to make life
richer and the world more beautiful. They include
social services that help people stay connected,
cutting-edge mobile services that let users access
the Internet anytime and anywhere, and Naver’s
advanced-level search services, which make
learning new things and sharing information fast
and easy.
NAVER
HANGAME
MOBILE NAVER
me2day
JR. NAVER
HAPPYBEAN
HANGAME JAPAN
NAVER JAPAN
LIVEDOOR
ijji.com
Connect
Hangame offers users a wide variety of web-board and
publishing games, while NHN’s state-of-the-art search and
game services are now available to netizens in Japan and
the US. In addition, contributions to Happybean, our donation
portal, are helping to spread the gift of sharing around
the world. Going forward, NHN will continue providing its
users with creative and innovative experiences and services.
032 / Service Overview
033 /
Naver, Korea’s leading Internet search portal, has been providing the world’s first Unified Search
based on its own search engine since August 2000. It has become a leader in the dissemination of
knowledge by providing a broad spectrum of services to facilitate information sharing and enhance
communications. These range from search services (e.g., Unified Search, Knowledge-iN, etc.),
community services (including blogs and cafes), and news, shopping, and map features for mobile
and SNS users. About half of Naver’s 34 million members use these services on a daily basis. Its
search engine market share has remained above the 70% level since 2006.
Naver: Adding to your competitiveness
Korea’s leading Internet search portal
www.naver.com
/
Naver
(As of
December 2010)
/
No. of subscribers
Search
No. of unique visitors per day
34 million
(As of
December 2010)
12 million
No. of unique visitors per day
No. of page views per day
17 million
270 million
No. of page views per day
No. of search queries per day
1,100 million
130 million
Delivering high-quality information through accurate and
Industries, the Korean Intellectual Property Office, The National
in-depth searches
Library of Korea, the National Statistical Office, the Korea Trade-
Naver boasts the world’s first wholly-unified search service. It shows
Investment Promotion Agency, and the Ministry of Culture, Sports and
search results at a glance, organized into such categories as blogs,
Tourism. It also offers advice and information from over 2,200 experts,
news, reports from experts, images, videos and Knowledge-iN, a
including doctors, lawyers, and certified labor attorneys.
user participation information service that is driven by the users’ own
questions and answers. It also includes a function called Sequence
Creating an open Internet world
Search, which maximizes user convenience by creating optimized
Naver is creating a more accessible Internet world, in which users can
search queries even when a proper keyword is not known, and Real-
produce information and share their knowledge quickly and easily.
time Search, which updates search results every five seconds.
User Generated Content (UGC), including information on daily life and
individuals’ and professionals’ knowledge and expertise, is connected
Generating and distributing information through an innovative
to search services beyond the Naver community space, including
information distribution platform
blogs and cafes, helping to form a richer Internet environment. Naver
Naver has evolved into an unparalleled information distribution
is also opening the Application Programming Interfaces (API) of its
platform on which everyone can generate and distribute information,
major services, such as Knowledge-iN and Dictionaries, through the
based on a structure that includes Open Cast, News Cast, Theme
Naver Developer Center.
Cast, Naver Cast, and Shopping Cast. News Cast distributes media
content, while Open Cast helps smaller sites and individuals with
Offering new Internet experiences in the mobile environment
content generation and distribution. Theme Cast and Naver Cast are
Naver is committed to providing seamless Internet experiences in
tasked with offering information and knowledge, while Shopping Cast
the mobile environment. Naver Mobile offers 21 services, including
provides users with shopping content.
searches, Knowledge-iN, cafes, news, Communication Cast, blogs,
me2day, Wingbus (a site about restaurants in Seoul), weather, and
Providing high-quality content and a wide range of professional
securities. By offering the N-Drive online storage space and photo
information
albums, as well as email and calendar services, it helps users enjoy a
Naver offers seamless access to high-quality information in partnership
personalized web environment in which they can check their email and
with such organizations as the National Information Society, the
schedules and utilize their data 24/7.
1999Jun.Launched "Naver" service
2000MayLaunched "Naver News" service
2000Aug.Launched "Naver Unified Search" service
2000Sep.Launched "Naver Photo Album" service
2001May
Launched "Naver Keyword Search Ads"
service
2001MayLaunched "Naver Shopping" service
2002Jun.
Launched "Enjoy Japan," a Web search
service about Japan
2002Oct.Launched "Knowledge-iN," Naver’s
knowledge search service
2002 Nov.Inaugurated Nesamo, an online community
for Naver lovers
2003Aug.Ranked number one in searches in every
Internet-related category
2003Oct.
Launched "Knowledge Shopping" service
2003Oct.
Opened "Naver Blog" service
2003Dec.Opened "Café-iN," Naver’s online
community service
2004Jan.Number of articles in "Knowledge-iN"
database surpassed 10 million
2004Apr.Opened "Knowledge Market," an exchange
channel for specialized knowledge
2004May
Launched "Local Information Search" service
2004Jul. Launched "Search Inside of Books" service
2004Sep.Launched "Books" service
2005Jan.Launched "Unified Music Search" service
2005Apr.
Launched "Naver New Knowledge-iN"
campaign
2005Apr.Launched "Direct Search," a daily life
information search service
2005May
Launched "Real-time Top Queries," a first for
the industry
2005May
Launched "Pop-up Naver," a new-concept
wireless search service
2005Jun.Launched subway information search service
2005Jul.
Ranked first in number of unique visitors in
all Internet-related categories
2005Oct.
Launched "My PC Search" service, Korea’s
first desktop search service
2005Dec.Launched "Video Search" open beta service
2005Dec.Launched "Photo Street" open beta service
2006Jan.Launched "Naver Phone," a free Internet
phone service
2006Jan.Launched "Naver Desktop" open beta
service
2006Mar. Opened "Naver World Town"
2006Mar. Unveiled "Open API"
2006Apr.Opened "Blink" beta service, a blog post
link-sharing service
Korean Academy of Medical Sciences, the Federation of Korean
035 /
2006MayOpened "Naver Play," a video UCC-based
community service
2006Jun.Opened "Naver-Toon," a cartoon UCCbased community service
2006Jun.Opened "Free Independent Film Service," a
first for the industry
2006Jul. Launched "Video Search" Service
2006Aug.Launched SBS video search service, a first for
the industry
2006Nov.Opened 24-hour Naver news information
center
2006Nov.Launched "Naver Phone Open Talk," a free
group-calling service
2006Nov.Launched "Naver Toolbar 3.0," with free
anti-virus software
Connect
2006Dec.Launched outlink-applied "News Search"
service
2006Dec.Launched "Headline News" from leading
media companies on Naver’s home page
2007Jan.Opened "Naver Blog Season 2: Episode 1"
next-generation blog
2007Jan.Opened "Naver Bookmark 2.0"
2007 Mar.Launched "Item Factory," in which
community items are produced and shared
2007Apr.Opened "Naver Deskbar 2.0"
2007Jun.Launched "Last Keyword Match Ranking"
service
2007Jun.Launched trial service of limited personal
identification program
2007Jul.Launched "Smart Editor" web documents
editing function
2007Aug.Opened "Naver Video" unified video
platform
2007Aug.Launched "Open API" desktop widget
2007Oct.Opened "Real-time Traffic Information"
service
2007Oct.Introduced "ID Subscription Lock" function
2007Oct.Reorganized "Keep It Clean" news comment
function
2007Oct.
Developed phone connection service in
collaboration with Korea Telecom
2008Jan. Opened "LGT mobile search" service
2008Jan.Opened "Wikipedia search" service
2008Jan.Opened "IPTV" service
2008Jan.Offered "PC Green," a free, real-time antivirus software package
2008Jan.Opened "Naver Lab," an online web
technology research laboratory
2008Feb.Introduced "CCL" (Creative Commons
License) in Naver Blog and Café
2009Jan.Revamped Naver’s home page
2009Jan.Launched Naver "Satellite & Aerial Maps"
service
2009Jan.Launched "Knowledge-iN Expert’s Answer"
service
2009Jan.Launched "Support for Knowledge Activities
in Power Knowledge-iN" program
2009Apr.Published "Naver Trend Yearbook 2008"
2009MayLaunched Naver "Knowledge-iN Lawyers’
Answers" service
2009Jun.Launched "Mobile Web" service (m.naver.
com)
2009Jun.Launched "Panorama Map" service
2009Jun.Launched "Naver Calendar" service
2009Jul. Launched "Naver Japan" open beta service
2009Jul. Launched "Naver Checkout," a shopping
support service
2009Jul.
Launched "N-Drive," an individual web
storage service
2009Oct.Launched Naver Newscast Ombudsman
Committee
2009Nov. Launched "Open Calendar" service
2009Dec. Launched "Naver Address Book" service
2010Mar.Launched "Naver Shopping Cast" service
2010Apr.Held Naver Shift 2010
2010Apr.Launched "Naver Sequence Search" service
2010jun. Launched "Naver Mobile Real-time Search"
and "Fusion Web" service
2010 Aug.Launched "Naver Word," a web-based word
processing service
2010Sep.Launched "Naver Street View" map service
2010Sep.Launched "Naver Social Apps" service
2010Oct.Launched Naver Social Network Search
2010Dec. Launched "Naver me" open beta service
Hangame, a pioneer in the web-board game genre in Korea, is the country’s largest
online game portal. Popularizing online games through a wide variety of easy games that
anyone can enjoy, it is getting closer to customers around the world with its active
global expansion strategies.
Go Hangame, a fun place to take a break
Korea’s first online game portal
www.hangame.com
/
Hangame
(As of
December 2010)
No. of subscribers
30
million
/
Major
Games
In Service
To Be Launched
Name
Genre
Name
Genre
C9
MMORPG
TERA
MMORPG
No. of peak concurrent users
Seven Souls
MMORPG
FPS
290
Atlantica
MMORPG
Metro Conflict:
Presto
Granage
RPG
Kingdom Under Fire II
MMORPG
ASTA
MMORPG
Fishing Hero
Sports
Baseball Club
Sports
thousand
Planet Z9
No. of games
361
RPG
Go-Stop,
Poker
Web-board
Tetris
Puzzle
Buy City
Simulation
Popo Joy
Puzzle
L.O.S.T
Web game
Note: TERA was commercialized in January 2011.
Online games designed for everyone
Developing a sound and healthy gaming culture
Launched in December 1999, Hangame entertains users with more
Hangame offers a wide range of user protection programs.
than 300 titles in a wide number of genres, including web-board
They include a User Protection Program (UPP) for the sound use
games and MMORPG, First Person Shooting (FPS), sports, and serious
of games, and the Child Management Service, located inside the
games. In addition, it features about 100 kinds of Flash games and
Hangame online customer center. It is designed to help parents
a host of casual games that can be enjoyed without logging in.
teach their children about healthy gaming habits.
Premium-quality services
Evolving into a global game publisher
Hangame developed an innovative business model for the games
Using a wealth of knowledge gained in Korea’s online game market,
industry by introducing fee-based, premium-level services for games
Hangame developed a world-wide network platform in such places
whose basic features can be accessed for free. These add-ons, which
as Japan and the US. It will continue growing into a top-tier global
Hangame was the first player in the world to introduce, have since
publisher, based on its reputation as Korea’s leading game platform
become a mainstay of the online game industry world-wide.
and its global presence.
Providing a safer gaming environment
Hangame was the world’s first online game provider to acquire
an ISO/IEC 27001 global standard certification in the personal
information protection category. Other steps that it has taken to
ensure a safer gaming environment include offering the keyword
security solution "Secure Keystroke," the Hangame Security Patch
service, and the Hangame Universal One-Time Password (U-OTP)
service.
1998 Nov.Established Hangame Communications
Corporation
1999Dec.Opened Hangame game portal
2000Feb.Number of subscribers and concurrent users
exceeded one million and ten thousand,
respectively
2000Aug.Launched "Seven Poker" service
2000Sep.Ranked first among world gaming websites
(Alexa.com)
2001Feb.Launched "Club Service," providing a variety
of community functions
2001Mar.Launched "Hangame Premium Service,"
the world’s first item-based business model
2001MayLaunched fee-based "Avatar Service"
2001Oct. Entered online game publishing business
2001Dec. Held first Game Creation Competition
2002Jan.Launched Hangame customer reward
program campaign
2002Mar. Launched "Magic Tetris" service
2002Apr. Launched "Pristontale" channeling service
2002Sep.Launched "Goldwing" 3-D flight
shooting game
2002Oct.Launched "Ryl Online" MMORPG
channeling service
2002Nov.Held second Game Creation Competition
2003Jul.Entered into partnership with Baduk
Television, a cable channel for baduk
(Korean checkers)
2003Aug.Launched "Hangame Keeper"
2003Dec.Launched "Hangame Honey" customer
monitoring group
2004Feb. Held third Game Creation Competition
2004Mar. Launched "New Mot-Go" service
2004Aug.Launched "Golf King," a 3D online
casual golf game
2004Aug.Launched "Sachunsung," a mahjong-type
puzzle game
2004Oct.Launched "G-Campaign" large-scale
brand promotion
2005Mar.Launched "Archlord" MMORPG
publishing service
2005Apr.Launched "Bout" 3D online robot action
game publishing service
2005Jun.Certified as Information Security-Checked
Service
2005Dec. Launched security patch service
2006Jan.Launched "Kwon-Ho" online fighting game
publishing service
2006Jan. Launched "New Yut Game" service
2006MayLaunched "Hangame Story" open
community service
2006Aug.Launched "Dungeon & Fighter" online
action game channeling service
2006Aug.Launched "The World You Meet First" social
contributions campaign
2006Sep.Launched "Hangame Happybean" service
for online donations through gaming
2006Oct.Introduced one-time password (OTP) service
037 /
2006Dec.Acquired "Personal Information Protection
ISO27001" certificate, a world’s first in the
gaming category
2007Jan.
Launched "Skid Rush" racing RPG
publishing service
2007Jan.Launched "Riding Star" online snowboard
game publishing service
2007 Feb.Launched Game Culture Campaign in
collaboration with other industry players
2007Apr.
Launched "Game Pack" casual game
package service
2007Jun.
Launched "Warlord" political-economic RPG
publishing service
2007Jul. Launched "Gravity Zone" channeling service
2007Jul.Launched Hangame "S Internet café"
2007Jul.Created KRW 25 billion game publishing
fund in tandem with Golden Bridge Asset
Management
Connect
2007Aug.Launched "Tales Runner" casual racing game
channeling service
2007Oct.Launched "Wolf Team" action FPS game
publishing service
2007Oct.Signed publishing agreement for "Valkyrie
Sky," a casual shooting game
2007Nov.Signed publishing agreement for "Lord of
the Rings Online" MMORPG
2008Jan. Revamped entire Hangame site
2008Jan.Launched "User Customized Service,"
including "GameCon"
2008Feb.Launched "Go Go Sing" battle racing game
publishing service
2008 Mar.Launched Hangame Happybean
"Donations Day"
2008Apr.Signed publishing agreement for "Monster
Hunter Frontier Online" blockbuster action
game in Korea
2008Apr.Opened "Hangame Clean Center" to create
a sound gaming culture
2008Oct. Launched "Tetris"
2008Oct. Number of Tetris users exceeded one million
2008Nov.Signed publishing agreement for "Kingdom
Under Fire II"
2008Nov.Signed publishing agreement with EA for
"Warhammer Online" in Korea
2008 Dec.Opened "Game Guideline Service for
Children"
2008Dec.Donated KRW 100 million for medical
services for the underprivileged through
"Hangame Happybean 2008 Donation
Angel" campaign
2008Dec.Launched "Child Protection Service"
2009Jan. Hosted "Hangame Invitation 2009"
2009Jan.Launched "Planet Z9" casual game
2009Mar.Launched "Hangame User Protection
Program"
2009Mar.Expanded "Chatting Message
Administration System" to include casual
games
2009Mar.Launched Webzen’s MMORPG channeling
service
2009Apr.Launched "Hanjamaru" serious game
2009MayLaunched "Global Baduk: Korea-China"
service
2009Jun.Entered European market with
"Karos Online"
2009Jul. Limited "Go-Stop Poker" game play to 10
hours a day
2009Jul. Launched "Game Talk" voice messenger
2009Jul. Participated in "China Joy 2009," the largest
game exhibition in that country
2009 Aug.Participated in Game Convention Online
(GCO) in Germany
2009 Aug.Launched "C9" open beta test
2009 Sep.Entered global game market with
"Call of Chaos"
2009Sep.Launched "FreeStyle" channeling service
2009Sep.Signed publishing agreement for "Granage"
2009Oct.
Entered into partnership with the Korea
Game Society for "GameOVEN in Academy
2009" business
2009Nov.Participated in "G-Star 2009" with "TERA"
and "Warhammer Online"
2009 Nov.Signed channeling agreement with KTH for
"Karos Online"
2009Dec.Launched "Pangya" golf game channeling
service
2009 Dec.Signed joint publishing agreement with CR
Space for "Seven Souls"
2009Dec.Launched "Karma 2" FPS game channeling
service
2009Dec.Built "Love-Sharing Neighborhood Library"
in Seongnam
2009Dec.Won grand prize at "2009 Korea Game
Awards" for C9
2009Dec.Launched "Audition" dance game
channeling service
2010Jan.Launched fund-raising campaign with
"Archlord" to help needy Haitians
2010Mar.Held "Hangame EX2010" to release seven
new games
2010Apr.Launched exclusive channeling service for
Webzen’s "Huxley: The Dystopia"
2010Apr. Launched "Seven Souls"
2010MayLaunched "Popo Joy" open beta service
2010 Nov.Launched "iDoGame" open beta service
2010Dec.Participated in "G-Star 2010" with "TERA,"
"Kingdom Under Fire II," "ASTA," and
"MetroConflict"
2010Dec.Launched "Granage" open beta service
Naver for Mobile Environments
Adding to your pleasure and enhancing your
competitiveness, anytime and anywhere
m.naver.com
What’s on your mind? me2day
Korea’s first micro blog service, creating
a 150-character communications culture
me2day.net
Jr. Naver: Riding on the wings of
imagination
A fun and educational portal for children
jr.naver.com
Happybean: A new way to care and share
Korea’s first online donation portal, connecting
netizens with public service organizations
happybean.naver.com
/
/
/
/
Naver
Mobile
(As of
December 2010)
/
Percentage
of mobile
traffic to PC
(As of
December 2010)
No. of monthly unique visitors
me2day
13 million
(As of
December 2010)
No. of Subscribers
me2day
4 million
(As of
December 2010)
No. of Subscribers
Happybean
4 million
(2005~2010,
total amount)
Total donations to date
KRW
23 billion
No. of monthly page views
No. of Daily Unique Visitors
No. of Daily Unique Visitors
No. of donors
1,800 million
1.25 million
1.1 million
6 million
No. of unique visitors
Daily Page Views
No. of Happy Brands
32 %
100 million
318
Page views
4%
Connect
Naver: Adding to your mobile convenience
Providing Korea’s first micro blog service
Korea’s largest children’s-only portal
The nation’s best online donations portal
In June 2009, "m.naver.com," a mobile version of Naver, was launched
Launched in 2007, Me2day is a micro blog service through which
As Korea’s largest portal for children only, Jr. Naver comes armed
Happybean is an online public service portal connecting caring and
for mobile users, enabling them to use a broad range of services.
users can share information about their daily lives with their friends
with a wide array of specialized educational contents for children,
concerned private citizens with social service organizations that need
They can be used on a wide array of mobile terminals, such as
and families. Based on a 150-character "small talk" format that is
including "Homework Helper" and "Preschool World." It also offers
their help. Happybean provides Internet users with the opportunity
smartphones, full-browsing phones, iPhone, iPod Touch, and PDAs.
rapidly breaking down the barriers between the Internet and the
a wide variety of educational, no-cost content for both children
to make donations and volunteer their services by connecting NHN’s
Naver offers 21 mobile services for such devices, including Search,
mobile environment, it is rapidly cementing its position as
and parents, including "Children’s Song World," "Fairy Tale Travel,"
many Internet services with their charitable activities.
Email, Blog, Café, N-Drive, and English Dictionary. Users can also find
a next-generation network services leader.
and "Parents’ Room." Another feature is its entertainment services,
such as "Animal Farm" and "Game Land."
the same reliable and professional databases that they have accessed
Creating a healthy donation culture
on Naver with their PCs through mobile searches. These include
Creating a new communications culture between online and mobile
such topics as wines, medicine, festivals, exhibitions, and
me2day is a new-concept platform that connects the PC and mobile
Providing a healthy and fun Internet environment
which are blogs run by civic and social service organizations.
broadcasting.
environments. Users can enter their thoughts into me2day using their
Jr. Naver is a leader in the development of a safer Internet
"Happyloggers" post information on their organizations and share
mobile phones 24/7, after which they are delivered as text messages.
environment for children. It encourages healthy Internet habits
online fundraising and other activities. Users can donate to them
Supporting a wide array of useful applications
This allows people to share their thoughts and feelings easily and
through an "Internet Ethics Class," operates "Jr. Mom," a parents’
by means of "Happybean Beans," online donation items that they
Naver provides a wide range of mobile applications, such as N-Drive,
comfortably.
monitoring group, and provides carefully filtered information
acquire by using Naver’s services or purchasing them with real cash.
Map, me2day, Naver Blog, and Web Toon for iPhone, Android, and
managed by professional web surfers. Moving forward, it will
Over six million donors have used Happybean Beans so far. To ensure
Windows Mobile environments. Naver’s apps have been designed
continue to contribute to the development of high-quality content
transparency, every organization that receives donations must disclose
to meet users’ search needs relating to real-time issues through such
and an ever-safer computing environment.
how it uses them.
Happybean currently comprises more than 4,000 "Happylogs,"
functions as Music Search, Voice Search, Knowledge-iN, and Smart
Finder, while also providing lifestyle-related information, such as
Movies, Weather, Sports, and Exchange Rates. In addition, "Street
View" and "Aerial View," Naver’s map applications, have garnered
fulsome praise for their quality of service and convenience.
039 /
Hangame Japan:
Games & Community Services
Japan’s leading online game portal
www.hangame.jp
Naver Japan: Collaborative searching
A curation platform offering Unified Search in
collaboration with Matome
www.naver.jp
Japan’s most comprehensive web portal
Covering a wide array of businesses, including
media, web services, advertising, and infrastructure
www.livedoor.com
ijji.com: Where gamers unite!
A global-level, multiplayer online game portal
www.ijji.com
/
/
/
/
Hangame
Japan
(As of
December 2010)
No. of subscribers
36.1 million
Naver
Japan
(As of
December 2010)
No. of subscribers
livedoor
4 million
(As of
December 2010)
No. of subscribers
Ijji.com
No. of subscribers
9 million
(As of
December 2010)
11.7 million
No. of daily unique visitors
Monthly page views
166 thousand
1.1 million
900 million
26 thousand
No. of games
Daily page views
No. of monthly unique visitors
No. of games in service
236
100 million pages
25 million
15
Connect
Spreading the fun of online games
Searching on "Green Window"
A comprehensive web portal covering both online and
Providing the USA’s first-ever multiplayer online game service
Hangame Japan has successfully cultivated the online game genre
Naver Japan’s new search platform, "Green Window," helps users find
mobile platforms
NHN USA has been operating ijji.com, a game portal that provides
in the Japanese game market through a wide range of proactive
things that they really want to know but couldn’t find on other search
"livedoor" is a comprehensive web portal whose number of monthly
users with a variety of high-level multiplayer online games, since 2007.
localization efforts. It had previously been dominated by console
portals. It does this by deploying state-of-the-art technology to access
page views and unique visitors are about 900 million and 25 million,
It offers more than 50 games in a wide range of genres, including
games. Hangame Japan is now the nation’s biggest online game
information, people, and their knowledge and expertise and skills.
respectively. Its many services can be accessed on both the web and
web-board, Flash, action, and RPG. Its customer base of eight million
platform, offering users more than 190 online games in a variety of
Users can now find the information they really want—easily, and within
the mobile environment (m.livedoor.com). Its operating domains
results from introducing games that match the preferences of local
genres ranging from board games to action, racing, RPG, FPS, and
a single search.
include media and advertising businesses, web services from "livedoor
users.
Blog," and information delivery through "livedoor News."
MMORPG. It has also positioned itself as the country’s foremost
Leading the overseas expansion of Korean-developed online games
online game publisher, winning plaudits for its publishing platform’s
Matome: Gathering knowledge collectively
operating capabilities from such renowned developers as Square Enix,
Naver Matome is Naver Japan’s most popular user participation
High-popularity media and blog services
NHN USA provides a valuable platform for Korean game developers
Bandai Namco Game, and Sega.
service, meaning that users can act in concert to search for a single
"livedoor News," which comprises about 250 news sites, records 230
who have had problems entering the US game market due to a lack of
keyword. The term "Matome" originates from the Japanese word
million page views in an average month. Operating from the premise
experience in marketing. ijji.com serves as a bridgehead, so that more
Growing through a commitment to localization
"matomeru," which means "to find and organize." In the context of
that "users will decide whether it’s good or not," it is committed
Korean games—and their builders—can be introduced on the world’s
Hangame Japan’s success results from providing services that reflect
Naver Matome, it refers instead to "organizing information together
to linking people who love to write with people who love to read.
stage.
the characteristics and preferences of its Japanese users. For example,
for a single subject." Matome lets users latch onto the "hot" keyword
"livedoor Blog" provides a wide range of services for bloggers, from
about 90% of its staff is Japanese. As a result of this commitment to
of the day, see the responses of other users who have entered the
novices all the way to power bloggers, enabling them to improve their
localization and a large and growing menu of community and game
same query, and voice their opinions about the results.
writing skills and contribute to the sharing of information.
first in the entertainment category of the Yahoo! Internet Guide’s
Smart Finder: A sensational new search tool
Infrastructure business and data service
"Web of the Year" from 2004 to 2006.
Smart Finder is an astonishing new search tool that enables users
Another of livedoor’s services is an infrastructure business. It
to choose from many search conditions and see a list of results at
provides a one-stop data center service, with highly-skilled engineers
Offering the joy of gaming on mobile platforms
a glance, without even having to type a keyword. Users can find
maintaining and operating servers and networks 24/7 to meet
In order to serve Japan’s rapidly growing mobile content market
the results they want, even when they don’t remember the correct
customer needs and requirements.
better, Hangame Japan opened Hange (hange.jp), a mobile game
keyword.
features (including chat and avatar services), Hangame Japan placed
community website that offers emoticons, avatars, and more than one
hundred games. In the future, the company will augment its leading
position in the Japanese game market through a wide range of
differentiated mobile services.
041 /
/
Business Overview
NHN has enjoyed repeated growth and a stable
earnings base by expanding its business domains
from searches and games to mobile and overseas
services. Search ads (now including mobile ones)
have repeated their rapid growth year after year,
based on such capabilities as their high-quality
search engines, search ad products, and search ad
operating abilities.
SEARCH ADVERTISing
DISPLAY ADVERTISing
ONLINE GAME
Global Business
Connect
Display ads, profiting from Naver’s brand value and high
traffic volume, offer users a wide variety of new and exciting
products. In the games area, we are boosting our publishing
capabilities by launching a broad array of new games and
strengthening the soundness of our web-board ones.
Our Japanese operations have also been expanded, with
Hangame Japan, Naver Japan, and livedoor generating
synergies to firm up their positions and providing a solid
foundation for NHN’s takeoff into a global player.
042 / Business Overview
043 /
Search Advertising
/
Increased range of search ads and
commercialized mobile search ads
In 2001, NHN became the first player in the industry to introduce paid search ads. Since then,
fueled by its own search engine, it has enjoyed rapid revenue growth that has now made it Korea’s
largest search portal. Part of this success was due to offering our own search ads to outside
companies through NHN Business Platform, as well as launching a commercial service for mobile
search ads. Pre-spin-off revenue ballooned by 21.1% over the year to reach KRW 838.7 billion at
year-end.
Revenue
KRW 692,592 million
2009 Pre-spin-off
KRW 838,749 million
2010 Pre-spin-off
KRW 636,877 million
2008
Connect
Increased range of
Commercialized "PowerLink (Mobile)"
Offering a customized consulting service
"Click Choice" ad service
mobile search ad service
through NHN Search Marketing
We took a series of steps to extend the range
In September 2010, NHN added "PowerLink
NHN Business Platform (NBP) established
of our own search ads in 2010. In April, for
(Mobile)," its own mobile search ad service,
NHN Search Marketing (NSM) in March 2010.
example, we began providing "Click Choice,"
to Naver’s mobile search service to gain an
Its role is to provide more professional and
our own search ad service, to Auction,
early edge in the mobile search ad sector. In
value-added services to search advertisers.
Gmarket, and Best Buyer. Besides allowing
November, we commercialized mobile search
NSM opened A-Square (www.a-sq.co.kr),
us to enhance the service’s brand value,
ads through a cost per click (CPC) business
a center for mobile advertisers, in September,
the move increased our share of the overall
model. This was done by increasing the
and began offering its services on the
search ad market. At the end of December,
volume of traffic in such ways as supporting
mobile web in December. A-Square offers
we made NHN Business Platform our main
advertisers for the construction of web sites
advertising solutions, such as log and
agent for all of our various ad operations,
in the mobile environment. Mobile search
advertising trend analyses, automated
ending our partnership with Overture. We
advertising, which shows up to three ads at
bidding management, and reports on the
decided to replace Overture’s "SponsorLink"
the top of a search results page, benefits
effects of advertisements. Another way that
in our search ad areas with "Click Choice"
advertisers and adds to user convenience.
we add to the convenience and satisfaction
in 2011, enabling us to manage the quality
In addition, we operate the Naver Mobile
of our advertisers is by providing them with
of our ads in a more systematic and
Advertisers’ Center and the Mobile Web
such information as the degree of exposure
efficient manner. By utilizing "Click Choice,"
Service for increased advertiser satisfaction.
of the keywords they have bid on, and the
advertisers can choose the media platform
Key Indicators (Units: Millions of KRW, %)
results of the bidding.
Revenue
and exposure areas they want to place their
No. of Naver registered advertisers
ads in, adjusting the relative weighting of
PPC Growth Rate
their price per click (PPC) according to the
2009
2010
692,592
(Pre-spin-off)
838,749
(Pre-spin-off)
73,187
121,072
153,000
0.6%
9.3%
18.5%
Note: The number of Naver registered advertisers and the PPC growth rate are based on Click
Choice, the company’s own search ad service.
choices they make.
044 / 2008
636,877
Business Overview
045 /
Display Advertising
/
Increased sales by revamping sales policies
and launching new products
NHN operates a broad array of display ad venues, including Time Board and Rolling Board,
taking advantage of Naver’s brand value and high traffic volume. We are also constantly creating
new-concept ad products to maximize user convenience and increase the effect of their ads.
We launched Shopping Cast in March 2010, and revamped our sales policies for Naver’s home
page display ads in November. Display ad revenue went up by 14.9% year-on-year to
KRW 238.0 billion.
Revenue
KRW 207,212 million
2009 Pre-spin-off
KRW 238,025 million
2010 Pre-spin-off
KRW 195,000 million
2008
Connect
Reorganized display ads on Naver’s
Delivering the ultimate in shopping mall
Naver Checkout: maximizing
home page
ad strategies
the effect of ads
Naver reorganized its display ad sales policies
Naver Knowledge Shopping is a shopping
Naver Checkout is an online payment service
for its home page in November 2010. Our
portal that provides all the information
that lets users pay for purchases from its
products include Time Board (which shows
needed for efficient shopping in one place—
member shopping malls simply by using
exclusive ads for an hour at the top of
from lowest price searches to complete
their Naver ID. This solves the problem of
Naver’s home page) and Rolling Board (which
product information. Featuring 10,000 of the
having to subscribe to each shopping mall,
enhances ad effects through a variety of
country’s best-known shopping malls, it helps
allows users to check the process and results
targeting techniques and special interactive
advertisers increase their sales and attract
of their shopping on a single screen, and
materials). Time Board enables advertisers to
more customers by showing their products
simplifies such procedures as cancellations,
choose differentiated time zone marketing,
in a wide variety of venues, including its own
returns, and exchanges. Naver Checkout
using the most meaningful hours in the
domain, Knowledge-iN, and Naver’s home
offers its member shopping malls an
day for them. Unit costs vary by time zone.
page and Unified Search results.
exciting opportunity to add to their number
Rolling Board is a cost per millennium (CPM)
The Shopping Cast and Theme Shopping
of potential customers. It also appeals to
product, based on a stable ad inventory
areas, located at the bottom right of Naver’s
advertisers who want to use search ads
across all time zones. It launches ads using a
home page, give users more reasons to buy
or Knowledge Shopping to maximize the
wide range of techniques, and can target ads
new things by constantly providing them
efficacy of their ads. As of last December,
to match users’ ages, genders, and regions.
with useful product and event information.
about 1,400 shopping malls were using the
The results of these changes were positive,
Shopping Cast allows the shopping malls to
service.
including a rise in display ad revenue. Our
publish their brand and product information,
portfolio of advertisers also became more
enhancing users’ brand awareness through
diverse, due to an increase in small- and
their purchases. Theme Shopping displays
medium-sized advertisers.
products by theme, with users again moving
Key Indicators (Units: Millions of KRW, %)
Revenue
to a mall’s home page to buy them.
047 /
195,000
207,212
(Pre-spin-off)
238,025
(Pre-spin-off)
No. of campaigns
3,557
3,402
4,629
Percentage of Rich Media ad sales
19.9%
20.7%
32.0%
Online Game
/
Boosting the soundness of web-board games
and our publishing capabilities
In 2010, Hangame introduced voluntary controls to enhance the soundness of its web-board
games. Some steps that it took to develop the online games industry included opening the
PlayNet channeling site, improving its publishing capabilities to diversify its game portfolio, and
launching an open game market called "iDoGame." Online game revenue at the end of 2010 was
KRW 422.3 billion, down 5.5% from 2009.
Revenue
KRW 446,677 million
2009 Pre-spin-off
KRW 422,250 million
2010 Pre-spin-off
KRW 366,686 million
2008
Connect
Strengthened publishing capabilities by
Increased investments to foster the
Launched PlayNet channeling site
diversifying game portfolio
smartphone game business
NHN launched the open beta service of
Hangame has been busy improving its game
In reaction to the rapid growth and
"PlayNet," a Naver-linked game channeling
publishing capabilities and strengthening the
development of the smart devices market
site offering about 25 games, in November
soundness of all its web-board games. This
(including smartphones, tablet PCs, and
2010. It can be accessed with a Naver
strategy began to bear fruit in 2010.
smart TVs), NHN announced that it will invest
ID, without the need for an additional
It diversified its content by offering such
KRW 100 billion over the next three years
membership sign-up. It offers a game search
games as "Planet Z9" and "Seven Souls,"
in the smartphone game business. Its goal
feature that is connected to Naver’s own
and also released four blockbusters at
is to become the leading industry player
services, as well as content from game
"G-Star 2010," Korea’s largest game exhibition.
in both Korea and Japan. These steps will
webzines. In order to increase the use of
They included the much-anticipated MMORPG
include promoting an in-house studio inside
these services, we will enhance its linkage
"TERA," an FPS game called "Metro Conflict,"
Hangame, enhancing its level of cooperation
with Naver and add to its quality. We plan to
a strategic action game called "Kingdom Under
with outside developers, and investing KRW
continue contributing to the development
Fire II," and "ASTA," an MMORPG that is billed
2 billion to establish Orange Crew, which will
of Korea’s online game industry by providing
as the ultimate in Asian fantasies. "TERA,"
specialize in the development of games for
increased viewing opportunities for both
which took more than three and a half years
smartphone devices. Orange Crew’s main
well-known games and others that have
to develop, received enthusiastic praise from
tasks will be to develop game content for
been created by small and medium-sized
game users due to its amazing graphics and
smartphones and acquire outside developers.
developers.
free-targeting battle scenes, which enhance
It also plans to grow into Korea’s best game
user participation. All of these games are
developer for smart devices by continuing
scheduled to be launched in 2011, and revenue
to hire fully-experienced, top-quality human
from them is expected to rise exponentially.
resources.
Key Indicators (Unit: Millions of KRW)
Revenue
049 /
2008
2009
201
366,686
446,677
422,250
Global Business
/
Increased synergies with Hangame Japan,
Naver Japan, and livedoor
NHN’s global business has started to blossom with the dramatic growth of Naver Japan.
In 2010, we increased our synergies with Hangame and Naver Japan by acquiring "livedoor,"
a comprehensive Japanese portal. We also expanded the range of our online game and search
portal businesses in that country. Hangame Japan is rapidly emerging as the nation’s leading
online game player through a strategy of strengthening its capabilities for real games and mobile
games development and publishing.
UV
Growth in
PV
8
80
6
60
4
40
2
20
Naver Japan’s Traffic
(Unit: Million)
Reference: Nielsen Net Ratings
Connect
0
0
Jul. 2009
Nov. 2009
Mar. 2010
Jul. 2010
Dec. 2010
Expanded Matome service, and rising
Naver Japan will continue to strengthen
Hangame Japan launched new games
popularity of Naver mobile applications
its businesses and services with the goal of
Hangame Japan offers users over 230 online
Matome is an information sharing service
becoming a "curation platform" that assists
games in a wide range of genres, including
similar to Knowledge-iN in Korea, enabling
in sharing and distributing information and
traditional board games, action, racing,
users to share their thoughts on specific
knowledge.
RPG, FPS, and MMORPG. In 2010, it offered
subjects. We introduced the Matome
Imakore and Nendon—"real games" in which
Incentive Program in November 2010 to
Enhanced synergies with livedoor
online activities are directly connected to
develop its 100-million-content databases,
livedoor is a comprehensive portal that is
offline settings, events, or activities. It also
and ran an "Amazon Associate" ad in
rapidly growing in popularity thanks to its
launched the "Dragon’s Nest" and "Elsword"
December to return the entire amount of its
media and blog services. It boasts about
action RPGs, and plans to introduce the
profits to Matome’s users or use them for
25 million unique visitors a month. We
Korean sensation "TERA" shortly. It will also
social contributions activities.
added Naver Japan’s Image Search to it in
offer "iDoGame," and intends to add to its
Following its launch in August, Naver Japan’s
June, and started using Naver Japan’s own
services so that games that are developed
Image Search iPhone application ranked first
search engine in September. In addition,
there can be made available to the whole
in every free application category for three
we provided our Image Search to BIGLOBE
world through NHN’s global platform. In
straight days. By December, it had been
(www.biglobe.ne.jp) in July, and to
addition, we will open an "NHN Partners’
Brief History of Naver Japan
downloaded 300 thousand times.
mobile@nifty and Fresheye (www.fresheye.
Center" and continue maximizing our
Jul. 2009
Launched open beta service
com) in October and November, respectively.
relationship with game developers and
Aug. 2009
Launched Mobile Naver
In December, we released the Naver Japan
content providers in such areas as game
Apr. 2010
Acquired livedoor
iPhone application, providing users with
publishing, channeling, and development.
Sep. 2010Applied Naver Japan’s search
a variety of functions in a single package,
Moving forward, Hangame Japan will
such as Unified Search, Matome, and Image
continue enhancing its presence as Japan’s
Search.
leading game portal through a strategy of
engine to livedoor
Oct. 2010
continuous genre diversification.
051 /
Launched Naver Café
/
NHN helps people become closer to one another
and enjoy the joy of sharing warm hearts and
growing together.
/
It will continue to create more values and encourage
the dissemination of caring and sharing beyond linguistic
and cultural barriers. Our commitment to a better world
and a brighter future will never cease.
Connect
053 /
/
Financial Review
In 2010, NHN added to its competitiveness in terms of its
core search business and realized significant efficiencies
and cost reductions by establishing NHN Business Platform
(NBP)—a move that enhanced the overall efficiency of its
management. It also recorded its highest-ever revenue, mainly
by reorganizing its display ad products and consolidating its
lineup of publishing games.
Connect
Search ad revenue swelled by 21.1% over the year, driven
by improved search services and reinforced sales capabilities
following the spin-off of some of our businesses to NBP.
Display ad revenue increased by 14.9%. The value of the
company’s assets and capital increased significantly, solidifying
its financial structure even further. It also carried out a treasury
stock purchase to maximize shareholder value. In 2011, NHN
will continue growing through the further diversification
of its services. This will include strengthening its search ad
business, starting an open market-type service, expanding the
publishing business, and enhancing mobile services.
054 / Financial Review
055 /
MANAGEMENT DISCUSSION AND ANALYSIS
II. Summary of Financial Performance
Korea’s Internet industry has grown extremely rapidly, with the development of advanced communications infrastructures leading to a high
rate of penetration and the provision and distribution of a wide range of content and services. The industry has made its greatest strides in
the online ad, e-commerce, games, and digital content distribution sectors.
I. Introduction
Established in June 1999, NHN’s primary mission is to offer Korean and other Internet users the widest possible selection of online services.
In addition to operating the "Naver" portal service and the "Hangame" online game service, it leads the industry in terms of search
technologies, traffic volume, and online services and products. Most of its revenues are generated from search and display ads and online
games.
The following Management Discussion and Analysis contains a discussion of NHN’s goals and strategies going forward, information on its
past performances and its current financial and operating conditions, and an analysis of future prospects for Korea’s economy and its Internet
industry.
Since these statements may be affected by events in the future that are both unforeseen and unexpected, the company’s actual business
results and performances may be substantially different from those anticipated and described herein. Because of this, we urge you to use care
and discretion when interpreting the data.
In addition, NHN does not guarantee either the accuracy or the completeness of the information given below. Statements concerning the
company’s future cannot be construed as constituting promise or guarantees, and NHN is under no obligation to publish or otherwise provide
any additional information.
Reference for Analysis
NHN established NHN Business Platform (NBP) on May 1, 2009 by hiving off its online ad business and infrastructure divisions. This was done
through a simple spin-off, with NHN owning 100% of the shares. Since NHN could treat the gains and losses of NBP as equity-method gains or
losses, its own net income was not affected. To ensure greater accuracy, this Management Discussion and Analysis treats NHN’s business results
in both pre- and post-spin-off terms. If there are no additional comments, it is because the pre- and post-spin-off criteria are the same. Post-spinoff figures reflect the auditor’s opinion, while pre-spin-off ones have been prepared internally for added investor convenience.
The Internet industry supposedly possesses all of the key characteristics of free and unvarnished competition, due to its relatively low market
entry barriers. In actuality, however, it now operates as an oligopoly, in which specific companies have gained an early edge in the market by
offering more competitive services in terms of quality, the enhanced level of their content databases, and the loyalty of their users.
The entire Internet industry used to be seen as a high-end one, with very promising growth potential. However, a recent leveling-off in the
number of PC users and their rate of Internet utilization are now making mobiles and tablet PCs and advances into overseas markets more
attractive to industry players.
NHN is continuing to position itself as the leading player in the domestic Internet market by providing a unified search service based on its
excellent search technologies. Some of its other features include Knowledge-iN, a dictionary, and news services, as well as personalized and
community-oriented services, such as emails, blogs, and cafes. It is also concentrating on the production of mobile applications and games for
smart devices. Finally, it is strengthening its presence in the Japanese search market through Naver Japan.
In 2010, the company focused on enhancing its competitiveness in terms of search technologies and its core businesses (i.e., online ads
and games), strengthening its revenue portfolios through the expansion of its game publishing business and adding to its efficiency and
specialization through spin-offs. As a consequence, it enjoyed solid results during the year.
2010 revenues were KRW 1,514.8 billion, up 11.6% year-on-year (YoY). Operating income grew by 11.0% to KRW 599.8 billion. This was led by
balanced growth in search and display ads. Search ad revenue reflected strong growth in advertiser numbers and the advent of price-per-click
(PPC), while display ad revenue grew due to an enlarged product line and a revamped sales policy. Online game revenue was down slightly,
reflecting our commitment to a healthier web-board game environment.
In terms of operating expenses, labor costs rose minimally following a marginal increase in the number of human resources. Communication
costs were also up only slightly, thanks to improved management efficiencies through technology development. Advertising expenses and
commission expenses rose due to the promotion of new businesses, including me2day, mobile, and game publishing. Depreciation costs
increased due to a reduction in the useful lives of infrastructure-related assets. Operating income and net income grew by 11.0% and 17.2%,
respectively, reflecting operating expenses that are directly linked to sales. The table below shows our business performance for the past two
years.
Income Statement Summary
Pre-spin-off
Revenue
Post-spin-off
FY2009
FY2010
YoY
FY2009
FY2010
YoY
1,357.4
1,514.8
11.6%
1,237.1
1,312.5
6.1%
Search ads
692.6
838.7
21.1%
632.3
737.1
16.6%
Display ads
207.2
238.0
14.9%
150.4
144.9
-3.7%
Online games
446.7
422.2
-5.5%
446.7
422.2
-5.5%
10.9
15.8
44.9%
7.7
8.3
7.8%
Operating expenses
816.8
915.0
12.0%
705.3
705.4
0.0%
Labor costs
269.5
273.2
1.4%
231.9
214.2
-7.6%
Commission expenses
339.3
390.1
15.0%
336.0
376.3
12.0%
Advertising expenses
20.9
34.7
65.5%
19.3
30.0
55.4%
Depreciation expenses
49.6
77.8
56.8%
24.8
19.6
-20.7%
Communication expenses
54.2
57.0
5.2%
17.9
0.6
-96.8%
83.3
82.3
-1.3%
75.5
64.7
-14.3%
Operating income
540.5
599.8
11.0%
531.8
607.1
14.2%
39.8%
39.6%
-0.2%p
43.0%
46.3%
3.3%p
Net income
421.7
494.2
17.2%
421.7
494.2
17.2%
31.1%
32.6%
1.6%p
34.1%
37.7%
3.6%p
Other
Other
Operating income margin
Net income margin
Note: Post-spin-off figures differ in FY 2009 and FY 2010 due to the spin-off of NBP in May 2009.
057 /
1. Revenues
2010 revenue (pre-spin-off) was KRW 1,514.8 billion. Search ad revenue made up 55.4% of the total, while display ad and online game revenue
equaled 15.7% and 27.9%, respectively. The ratio of search and display ads rose by 4.3%p and 0.4%p each, due to increases in advertisers
and PPCs and ad campaigns. The proportion of online game revenue fell by 5.0%p as a result of NHN’s commitment to a healthier web-board
game environment.
The company is pursuing growth in its online game revenue through continuous new game releases, including "TERA," which went live in
January 2011. In order to grow the mobile game business, we decided to invest KRW 100.0 billion over the next three years. We established
Orange Crew to specialize in developing games for smart devices.
2. Profitability
2010 operating expenses (pre-spin-off) were KRW 915.0 billion, up 12.0% YoY. Commission expenses, which were the largest component, rose
due to an increase in commissions paid to subsidiaries that are linked to a rise in online ad revenue, and growth in commissions following an
expansion in publishing game revenue. Higher advertising expenses were driven by TV commercials for Naver and me2day and marketing
costs for the promotion of mobile and publishing games. Depreciation expenses increased due to an accounting change in the useful lives
of machinery and data processing equipment from four years to three. Labor costs edged up due to a rise in the number of NBP personnel
following the expansion of Click Choice and its advance into open market-type services. Although NHN's own number of human resources
decreased slightly. (Number of human resources = 3,192 at 2009-end and 3,288 at 2010-end on a pre-spin-off basis.)
Pre-spin-off
Pre-spin-off
Revenue
FY2009
FY2010
Post-spin-off
Percentage
YoY
FY2009
FY2010
Percentage
YoY
Post-spin-off
FY2009
FY2010
Percentage
YoY
FY2009
FY2010
Percentage
YoY
Operating expenses
816.9
915.0
-
12.0%
705.3
705.4
-
0.0%
1,357.4
1,514.8
-
11.6%
1,237.1
1,312.5
-
6.1%
Labor costs
269.5
273.2
29.9%
1.4%
231.9
214.2
30.4%
-7.6%
Search ads
692.6
838.7
55.4%
21.1%
632.3
737.1
56.2%
16.6%
Commission expenses
339.3
390.1
42.6%
15.0%
336.0
376.3
53.3%
12.0%
Display ads
207.2
238.0
15.7%
14.9%
150.4
144.9
11.0%
-3.7%
Advertising expenses
20.9
34.7
3.8%
65.5%
19.3
30.0
4.3%
55.4%
Online games
446.7
422.2
27.9%
-5.5%
446.7
422.2
32.2%
-5.5%
Depreciation expenses
49.6
77.8
8.5%
56.8%
24.8
19.6
2.8%
-20.7%
10.9
15.8
1.0%
44.9%
7.7
8.3
0.6%
7.8%
Communication expenses
54.2
57.0
6.2%
5.2%
17.9
0.6
0.1%
-96.8%
83.3
82.3
9.0%
-1.3%
75.5
64.7
9.2%
-14.3%
Other
Other
2010 operating income was KRW 599.8 billion, up 11.0% YoY, while operating margin (pre-spin-off) was 39.6%, down 0.2%p YoY. Earnings
before interest, taxes, depreciation, and amortization (EBITDA), and its margin rose by 14.8% and 1.3%p, respectively, to KRW 677.6 billion
and 44.7%. The high growth of the EBITDA margin compared to the operating margin was due to rises in non-cash equivalent expenses and
depreciation costs.
Pre-spin-off
Post-spin-off
FY2009
FY2010
YoY
FY2009
FY2010
YoY
Operating income
540.5
599.8
11.0%
531.8
607.1
14.2%
39.8%
39.6%
-0.2%p
43.0%
46.3%
3.3%p
EBITDA
Operating margin
590.1
677.6
14.8%
556.6
626.8
12.6%
43.5%
44.7%
1.3%p
45.0%
47.8%
2.8%p
EBITDA margin
Non-operating income surged by 96.7% YoY to KRW 88.5 billion, thanks to a rise in equity-method gains. This was due to healthy results from
NHN Japan, an increase in equity-method valuation gains incurred by the disposal of the stakes in Ourgame Asset (OAL) that NHN Global and
NHN PCCS-HK held, and gains on the disposal of equity-method securities incurred when NHN Service merged with NHN I&S. Non-operating
expenses increased by 12.8% YoY to KRW 44.2 billion, reflecting donations to charity and equity-method losses, mainly from NHN USA. Net
income margin grew by 1.6%p to 32.6%.
Pre-spin-off
Non-operating income
Non-operating expenses
Post-spin-off
FY2009
FY2010
YoY
FY2009
FY2010
YoY
45.0
88.5
96.7%
52.4
83.3
59.0%
39.2
44.2
12.8%
39.2
45.7
16.6%
Net income
421.7
494.2
17.2%
421.7
494.2
17.2%
31.1%
32.6%
1.6%p
34.1%
37.7%
3.6%p
Net income margin
059 /
III. Performances and Outlook, by Segment
NHN generates revenue through its "Naver" search portal and its "Hangame" online game portal. Search ad revenue flows from ads that
appear as part of Naver’s search results. It includes cost per click (CPC) and cost per time (CPT) models. Display ads are mostly comprised of
banner ads on Naver’s pages and Shopping Cast ads. Hangame’s main offerings are web-board games, publishing, and channeling games.
It generates revenue from monthly subscription fees, partial fee-based services, and sales of cyber items, including avatars.
3. Online Games
Hangame, NHN’s online game portal, offers web-board, publishing, and channeling games. Most of its revenue comes from monthly
subscription fees and cyber item sales.
Online game revenue decreased by 5.5% YoY to KRW 422.2 billion due to NHN’s commitment to creating a healthier web-board game
environment. The company is taking various steps to add to its revenue in 2011 by diversifying its revenue mix. Some of its efforts include
launching blockbuster publishing games, such as "TERA," "MetroConflict," "ASTA," and "Kingdom Under Fire II," establishing "PlayNet," a
website specializing in game channeling, launching a game open market called "iDoGame," and carrying out M&A’s.
1. Search Ads
NHN’s search ads are shown to Naver users as part of their search results. They are a highly effective advertising tool, since the people who
view them have made their search enquiries with a high intention of making a purchase.
NHN has enjoyed rapid revenue growth every year since it first introduced search ads in 2001. In 2010, it began promoting the external search
ad market in full scale through its own search ad, "Click Choice," increasing its revenues significantly. In September, it became the first player
in the industry to launch its own search ad product, "PowerLink (Mobile)," in the mobile environment. As a result, the number of registered
advertisers using Naver’s ad services in December rose by 26.0% YoY to 153 thousand.
In August, NHN decided to replace Overture’s SponsorLink as its main search ad section with NBP’s "Click Choice." It offers advertisers a
higher return on their investment by allowing them to select media sites and ad areas and place bidding weights on their keywords. This is
expected to add to the satisfaction levels of advertisers and users, leading to increased revenue growth.
Pre-spin-off
Post-spin-off
FY2009
FY2010
YoY
FY2009
FY2010
YoY
Online game revenue
446.7
422.2
-5.5%
446.7
422.2
-5.5%
Percentage
32.9%
27.9%
-5.0%p
36.1%
32.2%
-3.9%p
4. Other
Other revenue (pre-spin-off), mainly generated from Internet-based content services including real estate, music, movies, and video-ondemand (VOD), grew by 45.0% YoY to KRW 15.8 billion.
Pre-spin-off
2010 search ad revenue (pre-spin-off) rose by 21.1% to KRW 838.7 billion, due to an increasing number of search advertisers and PPCs.
Pre-spin-off
Post-spin-off
FY2009
FY2010
YoY
FY2009
FY2010
YoY
Search ads revenue
692.6
838.7
21.1%
632.3
737.1
16.6%
Percentage
51.0%
55.4%
4.3%p
51.1%
56.2%
5.0%p
FY2009
FY2010
YoY
FY2009
FY2010
YoY
Other revenue
10.9
15.8
45.0%
7.7
8.3
7.8%
Percentage
0.8%
1.0%
0.2%p
0.6%
0.6%
-
2. Display Ads
Display ads are growing in terms of both revenue and popularity, thanks to their competiveness relative to offline ads, growth in the number
of Internet users, and the increasing importance of Internet media outlets. In general, large-scale advertisers prefer them to search ads.
NHN offers a wide range of display ads, such as Time Board, and Rolling Board, all of which are profiting from Naver’s brand value and high
traffic volume. NHN is constantly creating new-concept ad products to maximize user convenience and the effect of the ads. In November
2010, the company reorganized its sales policy for display ads on Naver’s home page, introducing a customer-oriented, customized pricing
scheme that charges by time zone and seasonality instead of a flat unit price structure. This added to the demographic range of its advertisers,
who now vary from big advertisers to small and medium-sized ones. As a result, display ad revenue (pre-spin-off) surged by 14.9% YoY to KRW
238.0 billion.
NHN decided to offer an open-market type service through Naver’s Knowledge Shopping in 2011. This will enhance the competitiveness of
our knowledge shopping and search services by securing sellers' product information in a stable manner.
Pre-spin-off
Post-spin-off
FY2009
FY2010
YoY
FY2009
FY2010
YoY
Display ads revenue
207.2
238.0
14.9%
150.4
144.9
-3.7%
Percentage
15.3%
15.7%
0.4%p
12.2%
11.0%
-1.1%p
Post-spin-off
061 /
IV. Financial Structure
NHN is adding to its competitiveness in its core operations, such as search and display ads and online games, to achieve better business
performances and maximize its corporate value. It is also committed to building an optimal capital structure that will allow the company to
maximize its earnings. These efforts include making investments that prioritize growth potential and profitability, creating stable cash flow
from operating activities, managing its working capital more efficiently, and purchasing treasury stocks to maximize shareholder value.
Condensed Statement of Financial Position
2. Non-Current Assets
2010 non-current assets (pre-spin-off) were KRW 849.1 billion at year-end, surging by 45.2% YoY. Investment assets, which made up 56.9%
of the total, rose by 89.3% YoY to KRW 483.3 billion. This was led by increases in available-for-sale securities and equity-method securities,
mainly through discretionary asset management contracts.
The value of equity-method securities rose because the company established NHN Investment by investing KRW 50 billion to use up its
surplus funds and specialize in the investment business. NHN also acquired a KRW 40.8 billion, 51% stake in Wise Cat to strengthen its sports
game publishing activities and advance into overseas sports game markets.
Pre-spin-off
Total assets
Current assets
Non-current assets
Post-spin-off
FY2009
FY2010
Percentage
YoY
FY2009
FY2010
Percentage
1,393.2
1,798.3
808.5
949.2
YoY
100.0%
29.1%
1,304.9
1,720.3
100.0%
31.8%
52.8%
17.4%
676.4
824.2
47.9%
21.8%
584.7
849.1
47.2%
45.2%
628.5
896.1
52.1%
42.6%
Total liabilities
409.7
432.2
24.0%
5.5%
321.4
354.2
20.6%
10.2%
Current liabilities
377.2
307.5
17.1%
-18.5%
290.7
232.3
13.5%
-20.1%
Non-current liabilities
32.6
124.7
6.9%
283.0%
30.7
121.9
7.1%
297.4%
Total shareholders’ equity
983.5
1,366.1
76.0%
38.9%
983.5
1,366.1
79.4%
24.1
24.1
1.3%
0.0%
24.1
24.1
1.4%
194.1
194.1
10.8%
0.0%
194.1
194.1
-567.2
-671.1
-37.3%
18.3%
-567.2
24.6
30.8
1.7%
25.3%
1,307.9
1,788.2
99.4%
36.7%
Capital stock
Capital surplus
Capital adjustments
Accumulated other
comprehensive income
Retained earnings
NHN made an additional investment of KRW 50.0 billion in NHN Investment in February 2011. The increase in current assets stems from
increased investments in land, buildings, servers, and equipment. The completion of the company’s new office building led to a decrease in
construction in progress, which now includes a research institute in Chuncheon. Intangible assets went up by 14.0% YoY to KRW 33.4 billion,
reflecting goodwill worth KRW 1.8 billion incurred by the acquisition of me2day and a rise in intellectual property rights and software assets.
Pre-spin-off
FY2009
FY2010
YoY
FY2009
FY2010
YoY
Non-current assets
584.7
849.1
45.2%
628.5
896.1
42.6%
38.9%
Investment assets
255.3
483.3
89.3%
377.5
594.5
57.5%
0.0%
Tangible assets
259.8
299.3
15.2%
191.8
248.2
29.4%
11.3%
0.0%
Intangible assets
29.3
33.4
14.0%
21.2
25.1
18.4%
-671.1
-39.0%
18.3%
40.1
33.2
-17.2%
37.9
28.3
-25.3%
24.6
30.8
1.8%
25.3%
1,307.9
1,788.2
103.9%
36.7%
Note 1: Post-spin-off figures differ in FY 2009 and FY 2010 due to the spin-off of NBP in May 2009.
Note 2: Percentage refers to the relative weighting to total assets.
1. Current Assets
2010 current assets (pre-spin-off) amounted to KRW 949.2 billion, up 17.4% YoY. Cash and cash equivalent assets made up 70% of the total,
increasing by 21.6% YoY to KRW 671.3 billion. This meant that the company had an excellent ability to generate earnings and more than
enough liquidity to meet its future capital needs.
Most of the company’s cash holdings will be used for the purchase of treasury stocks or the payment of dividends, investments in new
services, and M&As. The value of account receivables fell by 12.0% YoY to KRW 123.4 billion, while revenue increased by 11.6%, as the
company reduced its provisions for loan losses and increased its account receivables turnover through as a result of efficient management.
This resulted in a great improvement in cash flow from operating activities.
Pre-spin-off
Post-spin-off
Other
3. Liabilities
NHN maintained a satisfactory debt-to-equity ratio, thanks to its efficient liabilities management and its outstanding business results. In
September 2007, NHN issued private placement bonds worth KRW 100.0 billion, KRW 20.0 billion of which was transferred to NBP at the time
of the spin-off in May 2009. They were redeemed in August 2010. NHN then issued its own public placement bonds worth KRW 100.0 billion,
resulting in higher liabilities. Other increases were related to daily operating activities. Due to a rise in retained earnings, the company’s debtto-equity ratio dropped by 10.0%p YoY to 31.6%, on a pre-spin-off basis.
Pre-spin-off
Total liabilities
Accounts payable
Advances
Income taxes payable
Debentures
Provision for retirement and
severance benefits
FY2009
FY2010
YoY
FY2009
FY2010
YoY
Current Assets
808.5
949.2
17.4%
676.4
824.2
21.8%
Other
Cash and cash equivalent assets
552.2
671.3
21.6%
391.3
552.8
41.3%
Debt-to-equity ratio
Account receivables
143.7
126.4
-12.0%
181.3
159.8
-11.9%
112.6
151.4
34.5%
103.8
111.7
7.6%
Other
Post-spin-off
Post-spin-off
FY2009
FY2010
YoY
FY2009
FY2010
YoY
409.7
432.2
5.5%
321.4
354.2
10.20%
66.2
35.4
-46.5%
45.8
57.1
24.7%
31.0
41.9
35.2%
7.9
13.8
74.7%
66.6
88.3
32.6%
64.3
87.8
36.5%
100.0
100.0
0.0%
80.0
100.0
25.0%
10.6
13.3
25.5%
8.7
10.5
20.7%
135.3
153.2
13.2%
1,146
85.1
-25.7%
41.7%
31.6%
-10.0%p
32.7%
25.9%
-6.8%p
Note 2: The debt-to-equity ratio refers to the ratio of liabilities to shareholders’ equity.
063 /
4. Shareholders’ Equity
Total shareholders’ equity grew by 38.9% YoY to KRW 1.4 trillion, mainly due to an increase in retained earnings. NHN purchased treasury
stocks twice in 2010 worth KRW 176.3 billion (2% of the number of shares issued), leading to a decrease in the amount of shareholders’ equity.
The number of treasury shares stood at 3,298,230 as of the end of December 2010, equivalent to 6.9% of the total shares issued.
Pre-spin-off / Post-spin-off
Total shareholders’ equity
Capital stock
Capital surplus
Capital adjustment
Accumulated other comprehensive income
Retained earnings
FY2009
FY2010
YoY
983.5
1,366.1
38.9%
24.1
24.1
0.0%
194.1
194.1
0.0%
-567.2
-671.1
18.3%
24.6
30.8
25.3%
1,307.9
1,788.2
36.7%
2. Capital Expenditures (CAPEX)
2010 CAPEX (pre-spin-off) fell by 3.3% YoY to KRW 129.7 billion, due to decreased investments in land and buildings following the mid-year
completion of the company’s new office building. Current activities include building a research institute in Chuncheon, a development center
in Pangyo, and child-care facilities. CAPEX for servers and equipment rose sharply, due to an increase in investments following the relocation
of the Internet data center in the second quarter.
Intangible assets include software, intellectual property rights, and goodwill. Goodwill included KRW 1.8 billion that was incurred by acquiring
the business rights of me2day, which was merged into NHN's affiliate, Search Solution. This will be amortized over the next five years, using
the straight line method.
Pre-spin-off
CAPEX
Post-spin-off
FY2009
FY2010
YoY
FY2009
FY2010
YoY
134.1
129.7
-3.3%
130.9
88.8
-32.2%
Land and buildings
93.2
60.6
-35.0%
91.6
62.8
-31.4%
Servers and equipment
24.2
52.8
118.2%
10.9
5.9
-45.9%
Intangible assets
16.7
16.3
-2.4%
14.7
11.4
-22.4%
V. Cash Flow Analysis
Note 2: Construction-in-progress assets are included in land and buildings.
2010 cash flow from operating activities (post-spin-off) was KRW 516.7 billion, up 86.2% from KRW 277.5 billion the preceding year. This was
mainly due to a rise in net income of 17.2%, as well as an increase in cash collections following a decline in account receivables due to the
more efficient management of account receivables.
This increase in cash flow from operating activities allowed NHN to acquire new equity-method securities and available-for-sale securities to
ensure higher investment yields. This, in turn, led to a 28.2% rise in cash outflows to KRW 326.2 billion. Cash outflows from financing activities
swelled by 79.5% YoY to KRW 106.8 billion. This was mostly due to the acquisition of treasury stocks worth KRW 176.3 billion. During the year,
private placement bonds worth KRW 80 billion were redeemed, and public placement bonds worth KRW 100 billion were issued.
1. Cash Flow
2010 cash flow from operating activities (audited, post-spin-off) were KRW 516.7 billion, up 86.2% YoY. This was mainly due to a rise in net
income of 17.2%, as well as an increase in cash collections following a decline in account receivables, driven by improved management of the
receivables.
This allowed NHN to make new investments to propel higher growth, leading to a 28.2% rise in cash outflow of KRW 326.2 billion. Cash flow
from financing activities soared by 79.5% YoY to KRW 106.8 billion, mostly due to the acquisition of treasury shares worth KRW 176.3 billion.
During the year, NHN redeemed private bonds worth KRW 80 billion and issued new public placement bonds worth KRW 100 billion.
VI. Outlook for 2011
In 2010, NHN recorded its largest-ever revenue by adding to the competitiveness of its core operations and adding to its operating efficiency
through the successful spin-off of NBP. Despite a rapidly changing business environment, the company will continue building its growth
momentum in 2011 by revamping its core operations, while also seeking to augment its competitive edge in the mobile Internet market.
Today’s Internet search environment is evolving into an information distribution platform, on which anyone can generate and distribute
information. NHN is leading this movement by creating an open Internet world in which users can produce information easily and share
knowledge equally. In 2011, the company will continue to bolster Naver’s search competitiveness in the search segment by popularizing Naver
me, a personalized social service, Naver talk, a wired and wireless integrated communicator, social network services (such as me2day), and
mobile services.
In addition, the company is forwarding the successful implementation of NBP’s search ad platform by constantly innovating its search service
and strengthening its product competitiveness. It will also make various efforts to ensure stable growth in the future. These include improving
the quality of its products and reorganizing its systems. In the online game sector, NHN will continue to expand its publishing and channeling
services, and enhance the soundness of its web-board games.
Post-spin-off
FY2009
FY2010
YoY
Cash flow from operating activities
277.5
516.7
86.2%
Cash flow from investment activities
-254.4
-326.2
28.2%
-59.5
-106.8
79.5%
Cash flow from financing activities
In 2011, NHN will continue to solidify its leading position by proactively facing the challenges that the rapidly-changing Internet market
presents. It will do this through ongoing technology development, by reinforcing its core competitiveness, and by diversifying its business
structure.
065 /
Independent Auditors' Report
Based on report originally issued in Korean
The Board of Directors and Stockholders
NHN Corporation:
We have audited the accompanying non-consolidated statements of financial position of NHN Corporation
Without qualifying our opinion, we draw attention to the following:
(the "Company") as of December 31, 2010 and 2009 and the related non-consolidated statements of income,
appropriation of related earnings, non-consolidated statements of changes in equity and cash flows for the years
As discussed in note 2 to the non-consolidated financial statements, accounting principles and auditing standards
then ended. These non-consolidated financial statements are the responsibility of the Company's management.
and their application in practice vary among countries. The accompanying non-consolidated financial statements
Our responsibility is to express an opinion on these non-consolidated financial statements based on our audits.
are not intended to present the financial position, results of operations, changes in equity and cash flows in
accordance with accounting principles and practices generally accepted in countries other than the Republic of
We conducted our audits in accordance with auditing standards generally accepted in the Republic of Korea.
Korea. In addition, the procedures and practices utilized in the Republic of Korea to audit such non-consolidated
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
financial statements may differ from those generally accepted and applied in other countries. Accordingly, this
the financial statements are free of material misstatement. An audit includes examining, on a test basis,
report and the accompanying non-consolidated financial statements are for use by those knowledgeable about
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing
Korean accounting principles and auditing standards and their application in practice.
the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the non-consolidated financial statements referred to above present fairly, in all material respects,
the financial position of NHN Corporation as of December 31, 2010 and 2009 and the results of its operations,
appropriation of its retained earnings, the changes in its equity and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the Republic of Korea.
Seoul, Korea
February 24, 2011
This report is effective as of February 24, 2011, the audit report date. Certain subsequent events or circumstances, which may occur between the audit
report date and the time of reading this report, could have a material impact on the accompanying non-consolidated financial statements and notes thereto.
Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the
impact of such subsequent events or circumstances, if any.
067 /
Non-Consolidated Statements of Financial Position
Non-Consolidated Statements of Income
As of December 31, 2010 and 2009
For the years ended December 31, 2010 and 2009
(In thousands of KRW, except share data)
2010
Sales (Note 6, 25)
Assets
Cash and cash equivalents (Note 13)
Short-term financial investments (Note 3)
Short-term trading securities (Note 4)
Short-term available-for-sale securities (Note 4)
(In thousands of KRW)
2009
Accounts receivable-trade, less allowance for
doubtful accounts of \9,967,416 in 2010
and \12,485,329 in 2009 (Note 6, 13, 14)
\350,127,638
\266,420,425
202,633,817
124,900,000
45,033,576
-
-
35,189,444
159,760,429
181,322,419
1,226,035
2,846,544
Non-trade receivables, net (Note 6, 13)
Prepaid expenses
16,777,948
19,947,525
Current deferred tax assets (Note 17)
15,507,793
20,727,687
Other current assets
33,123,866
25,069,392
Total current assets
824,191,102
676,423,436
Long-term available-for-sale securities (Note 4)
132,083,829
36,286,175
Equity method investments (Note 5)
440,900,285
322,810,001
Non-current investments
15,070,444
13,415,309
Property and equipment, net (Note 7, 10, 24)
248,210,252
191,844,297
Intangible assets (Note 9)
25,081,056
21,247,279
Non-current deferred tax assets (Note 17)
1,740,959
957,963
Other non-current assets
33,004,306
41,900,702
Total non-current assets
896,091,131
628,461,726
\1,720,282,233
\1,304,885,162
\57,111,734
\45,882,830
Total assets
Liabilities
Cost of sales (Note 6)
Gross profit
Selling, general and administrative expenses (Note 6)
Non-trade payables (Note 6, 13)
Accrued expenses (Note 13)
49,723,992
68,507,687
Income tax payable (Note 17)
87,756,673
64,285,549
Advances from customers
13,795,645
7,942,917
23,960,416
24,141,664
-
79,973,238
232,348,460
290,733,885
9,363,236
17,825,714
Withholdings
Debenture, net (Note 10)
Total current liabilities
Long-term debt, net (Note 11)
Debenture, net (Note 10)
Provision for retirement and severance benefits (Note 12)
Leasehold deposits received
2,029,604
4,133,219
Total non-current liabilities
121,879,068
30,665,687
Total liabilities
354,277,528
321,399,572
100,000,000
-
10,486,228
8,706,754
Capital surplus
Capital adjustments (Note 16, 17, 18, 19)
Accumulated other comprehensive income (Note 4, 5, 17, 20)
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
24,063,852
24,063,852
194,072,912
194,072,912
(671,065,244)
(567,186,982)
30,823,762
24,592,860
1,788,159,423
1,307,942,948
1,366,054,705
983,485,590
\1,720,282,233
\1,304,885,162
549,117,451
525,150,672
763,388,282
711,960,244
180,141,605
531,818,639
Interest income
17,999,003
16,856,913
Interest expense
(5,418,141)
(5,442,810)
Gain on sale of available-for-sale securities
Loss on impairment of available-for-sale securities
Gain on valuation of equity method accounted investments, net (Note 5)
Gain on sale of short-term trading securities, net
Gain on valuation of short-term trading securities, net
Gain on sale of equity method accounted investments, net (Note 5)
Loss on impairment of equity method accounted investments
Foreign currency translation gain (loss), net (Note 14)
Foreign currency transaction loss, net
Gain (loss) on sale of property and equipment, net
Gain on sale of intangible assets
Loss on sales of trade receivables (Note 15)
Donation
Other, net
Other income
Income taxes (Note 17)
Net income
450,860
1,143
(169,152)
(109,791)
22,961,015
19,919,356
430,822
-
33,576
-
19,322,247
-
-
(467,953)
(18,886)
161,008
(105,927)
(1,249,416)
144,646
(2,440,098)
-
118,016
(8,342,190)
(7,682,181)
(14,799,650)
(12,948,741)
5,083,633
6,509,620
37,571,856
13,225,066
644,700,066
545,043,705
150,498,152
123,349,785
\494,201,914
\421,693,920
Earnings per share (in won)
Basic earnings per share (Note 18)
\11,024
\9,307
Diluted earnings per share (Note 18)
\10,958
\9,225
See accompanying notes to non-consolidated financial statements.
068 / 069 /
Financial Review
\1,237,110,916
156,260,072
Stockholders’ equity
Common stock of \500 par value Authorized - 300,000,000 shares
Issued and outstanding - 48,127,704 shares (Note 1, 15)
2009
\1,312,505,733
607,128,210
Operating income
Income before income taxes
2010
Date of Appropriation for 2010 : March 25, 2011
Date of Appropriation for 2009 : March 19, 2010
Non-Consolidated Statements of Appropriation
of Retained Earnings
Non-Consolidated Statements of Changes in Equity
For the year ended December 31, 2010
2010
2009
\1,289,037,226
\881,328,745
494,201,914
421,693,920
1,783,239,140
1,303,022,665
Common
stock
Capital surplus
Capital
adjustments
Accumulated
other
comprehensive
income
\24,063,852
\194,072,912
(\567,186,982)
\24,592,860
\1,307,942,948
Unappropriated retained earnings
Balance at beginning of year
Net income
Balance at end of year before appropriation
Appropriation of retained earnings
Loss on disposal of treasury stock
Reserve for technology developments
Unappropriated retained earnings to be carried over to subsequent year
13,306,418
13,985,439
7,500,000
-
\1,762,432,722
\1,289,037,226
Balance at January 1, 2010
Total
\983,485,590
Net income
-
-
-
-
494,201,914
494,201,914
Acquisition of treasury stock
-
-
(176,316,644)
-
-
(176,316,644)
Exercise of stock option
-
-
58,452,943
-
-
58,452,943
-
-
13,985,439
-
(13,985,439)
-
Increase in valuation gain on
available-for-sale securities
-
-
-
1,537,742
-
1,537,742
Capital changes in equity
method investees
-
-
-
4,482,398
-
4,482,398
-
210,762
Change in equity of equity
method investees
-
-
-
210,762
Balance at December 31, 2010
\24,063,852
\194,072,912
(\671,065,244)
\30,823,762
Balance at January 1, 2009
\1,788,159,423 \1,366,054,705
\24,063,852
\194,072,912
(\516,854,738)
\30,787,046
\886,718,486
\618,787,558
Net income
-
-
-
-
421,693,920
421,693,920
-
-
(84,235,215)
-
-
(84,235,215)
Grant of stock option
-
-
890,171
-
-
890,171
Exercise of stock option
-
-
32,543,342
-
-
32,543,342
-
-
469,458
-
(469,458)
-
Increase in valuation gain on
available-for-sale securities
-
-
-
217,464
-
217,464
Capital changes in equity
method investees
-
-
-
(6,024,796)
-
(6,024,796)
Change in equity of equity
method investees
-
-
-
(386,854)
-
(386,854)
\24,063,852
\194,072,912
(\567,186,982)
\24,592,860
\1,307,942,948
\983,485,590
Balance at December 31, 2009
070 / 071 /
Financial Review
Retained
earnings
Non-Consolidated Statements of Cash Flows
2010
2009
Cash flows from operating activities
2010
2009
(\77,733,817)
(\69,700,000)
458,019
1,045,734
Cash flows from investing activities
Net income
\494,201,914
\421,693,920
Adjustments for:
Acquisition of short-term financial investments, net Proceeds from property and equipment
Depreciation
12,074,072
18,251,019
Proceeds from intangible assets
Amortization
7,571,062
6,514,467
Acquisition of available-for-sale securities, net
Bad debt expense
3,129,046
2,322,865
Proceeds from equity method accounted investments
Loss on disposal of trade receivables
8,342,190
7,682,181
Acquisition of short-term trading securities, net
Gain on foreign currency translation, net
(26,078)
(257,870)
Decrease (increase) of deposits, net
Gain on valuation of short-term trading securities, net
Gain on sale of short-term trading securities, net
Loss on impairment of available-for-sale securities
Gain on sale of available-for-sale securities
-
337,306
(48,026,943)
(43,792,552)
22,759,516
-
(55,000,000)
-
10,800,370
(823,352)
(33,576)
-
Increase (decrease) of leasehold deposits, net
(2,103,614)
1,421,216
(430,822)
-
Acquisition of property and equipment
(68,753,401)
(102,465,246)
169,152
109,791
Acquisition of intangible assets
(11,404,839)
(14,706,924)
(450,860)
(1,143)
Acquisition of equity method accounted investments
(93,665,067)
(20,021,614)
Gain on valuation of equity method accounted investees, net
(22,961,015)
(19,919,356)
Increase of long-term loans receivable
(2,810,000)
(5,000,000)
Loss on impairment of equity method accounted investments
-
467,953
Others, net
Gain on disposal of equity method accounted investments
(19,322,247)
-
Stock compensation expense
Accrual for retirement and severance benefits
Interest expense
Loss (gain) on disposal of property and equipment, net
Gain on disposal of intangible assets
Net cash used in investing activities
890,171
16,023,364
Exercise of stock options
26,762
51,736
(144,646)
2,440,098
Proceeds from long-term borrowings
-
(118,016)
Proceeds from debenture
5,330,025
34,457,260
Repayments of long-term borrowings
Repayments of debenture
10,732,337
(146,572,385)
Net cash used in financing activities
Accounts receivable - trade
Non-trade receivables, net
845,616
(155,846)
Accrued income
(1,229,274)
(1,387,934)
Advance payments
(6,610,001)
(3,636,641)
Net increase (decrease) in cash and cash equivalents
Prepaid expenses
3,169,577
(10,517,029)
Long-term prepaid expenses
(433,151)
(4,154,507)
Deferred tax assets
4,823,179
(3,274,712)
Non-trade payables
11,004,282
9,771,692
Advances from customers
5,852,728
(4,143,072)
Income tax payable
23,471,124
(33,550,571)
Accrued expenses
(18,783,696)
29,184,621
Withholdings
178,783
2,153,072
Payment of retirement and severance benefits
(8,019,558)
(8,152,737)
Deposits for employees' severance benefit insurance
(6,378,904)
(4,072,468)
Others, net
(1,417,358)
(95,835)
17,205,684
(178,604,352)
\516,737,623
\277,546,828
Net cash provided by operating activities
(254,378,431)
57,735,666
28,078,335
(176,316,644)
(84,235,215)
700,000
2,100,000
100,000,000
-
(8,932,698)
(5,461,578)
(80,000,000)
-
(106,813,676)
(59,518,458)
Cash flows from other activities
Decrease due to spin-off
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
072 / 073 /
Financial Review
(672,999)
(326,216,734)
Cash flows from financing activities
17,386,985
Changes in assets and liabilities:
(736,958)
-
(13,211,769)
83,707,213
(49,561,830)
266,420,425
315,982,255
\350,127,638
\266,420,425
Notes to Non-Consolidated Financial Statements
(e) Transfer/Discount of Trade Accounts and Notes Receivable
In case the Company transfers or discounts its trade accounts and notes receivable, or when the rights and obligations of those receivables
are substantially transferred to others, the difference between book value and disposable value will be charged to loss on disposal of trade
receivables.
December 31, 2010 and 2009
(f) Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts and notes receivable. Allowances are calculated based on the estimates made
through a reasonable and objective method.
1. Organization and Description of Business
NHN Corporation (the "Company") was established on June 2, 1999 under the Commercial Code of the Republic of Korea to provide
internet portal services.
On October 29, 2002, the Company listed its shares on the Korean Securities Dealers’ Automated Quotations stock market, and then on
November 28, 2008, the Company transferred its shares to the Korea Composite Stock Price Index stock market.
The Company’s headquarters is located in Jeongja-dong, Seongnam-si, Gyeonggi-do, Korea.
As of December 31, 2010, the Company’s paid in capital amounted to \24,064 million with 48,127,704 shares outstanding having a par
value of \500 per share.
As of December 31, 2010, the major shareholders of the Company are as follows:
Number of Shares
Ownership percentage
\4,659,106
9.68%
Haejin Lee and executive personnel of the Company
Oppenheimer Funds, Inc.
4,400,182
9.14%
Lazard Asset Management LLC
3,035,522
6.31%
FID DIVERSIFIED INTRNTNL SUB A
2,456,070
5.10%
National Pension Fund
2,212,303
4.60%
31,364,521
65.17%
\48,127,704
100.00%
Others
2. Basis of Presenting Financial Statements and Summary of Significant Accounting Policies
(a) Basis of Financial Statement Presentation
The Company maintains its accounting records in KRW and prepares statutory financial statements in the Korean language in conformity with
the accounting principles generally accepted in the Republic of Korea. Certain accounting principles applied by the Company that conform
with financial accounting standards and accounting principles in the Republic of Korea may not conform with generally accepted accounting
principles in other countries. Accordingly, these financial statements are intended for use by those who are informed about Korean accounting
principles and practices. The accompanying non-consolidated financial statements have been condensed, restructured and translated into
English from the Korean language non-consolidated financial statements.
(b) Revenue Recognition
The Company recognizes its revenue from internet services upon delivery of the service. Revenue from other services is recognized using the
percentage-of-completion method.
(g) Investments in Securities
Costs of securities are determined using the moving-weighted average method. Investments in equity securities or debt securities are
classified into trading securities, available-for-sale securities and held-to-maturity securities, depending on the acquisition and holding
purpose. Investments in equity securities of companies, over which the Company exercises a significant control or influence, are recorded
using the equity method of accounting. Trading securities are classified as current assets while available-for-sale securities and held-to-maturity
securities are classified as long-term investments, excluding those securities that mature or are certain to be disposed of within one year,
which are then classified as current assets.
Held-to-maturity securities are measured at amortized cost while available-for-sale and trading securities are measured at fair value. However,
non-marketable securities, classified as available-for-sale securities, are carried at cost when the fair values are not readily determinable.
Gains and losses related to trading securities are recognized in the statement of income, while unrealized gains and losses of available-forsale securities are recognized under other comprehensive income and expense. Realized gains and losses of available-for-sale securities are
recognized in the statement of income.
(h) Equity-Method Investments
Investments in equity securities of companies, over which the Company exercises a significant control or influence, are recorded by using the
equity method of accounting. Under the equity method, the Company records changes in its proportionate ownership in the book value of
the investee in current operations, as capital adjustments or as adjustments to retained earnings, depending on the nature of the underlying
change in the book value of the investee. All other changes in equity should be accounted for under other comprehensive income (loss).
(i) Property, Plant and Equipment
Property, plant and equipment are stated at cost, which includes acquisition cost, production cost and other costs required to prepare the
asset for its intended use. It also includes the present value of the estimated cost of dismantling and removing the asset, and restoring the site
after the termination of the asset's useful life, provided it meets the criteria for recognition of provisions. Property, plant and equipment are
stated net of accumulated depreciation calculated based on the following depreciation method and estimated useful lives:
Depreciation Method
Estimated useful lives
Buildings
straight-line method
30 years
Structures
10 years
Furniture and fixtures
3-5 years
Vehicles
5 years
Expenditures incurred after the acquisition or completion of assets are capitalized if they enhance the value of the related assets over their
recently appraised value or extend the useful life of the related assets. Routine maintenance and repairs are charged to expense as incurred.
(c) Allowance for Doubtful Accounts
Allowance for doubtful accounts is estimated based on an analysis of individual accounts and past experience of collection and presented as a
deduction from trade receivables.
(j) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the identifiable net assets acquired. Goodwill is amortized
on a straight-line basis over five years. Where it is no longer probable that goodwill will be recovered from the expected future economic
benefits generated by the acquisition, it is expensed immediately.
(d) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and in banks, and financial instruments with maturity of three months or less at the time of
purchase. These financial instruments are readily convertible into cash without significant transaction costs and bear low risks from changes in
value due to interest rate fluctuations.
(k) Intangible Assets
Intangible assets are stated at cost, which includes acquisition cost, production cost and other costs required to prepare the asset for its
intended use. Intangible assets are stated net of accumulated amortization calculated based on using the following depreciation method and
estimated useful lives:
074 / 075 /
Financial Review
Estimated useful lives
(q) Provision and Contingent Liabilities
Industrial property rights
5 years
When there is a probability that an outflow of economic benefits will occur due to a present obligation resulting from a past event, and whose
Computer software costs
5 years
amount is reasonably estimable, a corresponding amount of provision is recognized in the financial statement. However, when such outflow is
Others
5 years
dependent upon a future event, is not certain to occur, or cannot be reliably estimated, a disclosure regarding the contingent liability is made
in the notes to the financial statements.
Development costs which are individually identifiable and directly related to a new technology or to new products which carry probable future
benefits are capitalized as intangible assets. Amortization of development cost begins at the commencement of the commercial production of
the related products or use of the related technology.
(l) Government Grants
The Company recognizes government grants, which are to be repaid, as liabilities. The government grants and donations, which are intended
to be used for the acquisition of certain assets, are deducted from the cost of the acquired assets. Before the acquisition of the assets
specified by the grant or donation, the amounts are recognized as a deduction from the account under which the asset to be acquired is to be
recorded, or from the other assets acquired as a temporary investment of the grant or donation received.
(r) Accrued Severance Benefits
Employees and directors with at least one year of service are entitled to receive a lump-sum payment upon termination of their employment
with the Company based on their length of service and rate of pay at the time of termination. Accrued severance benefits represent the
amount which would be payable assuming all eligible employees and directors were to terminate their employment as of the end of the
reporting period.
The Company has partially funded the accrued severance benefits through severance insurance. Deposits made by the Company are
recorded as deductions from accrued severance benefits. The excess portion of deposits over accrued severance benefits is recorded as other
The government grants or donations, received to compensate for specific expenses, are offset against the related expenses. Other
government grants or donations, for which the use or purpose is not specified, are recorded as gains from assets received, and are recognized
in non-current operations.
investments.
(s) Translation of Assets and Liabilities Denominated in Foreign Currencies
Monetary assets and liabilities denominated in foreign currencies are translated into KRW at the rates of exchange in effect at the end of the
(m) Impairment of Assets
When the book value of an asset is significantly greater than its recoverable value due to obsolescence, physical damage or an abrupt decline
in the market value of the asset, the said decline in value is deducted from the book value to agree with recoverable amount and is recognized
as an asset impairment loss for the period. When the recoverable value subsequently exceeds the book value, the impairment amount is
recognized as gain for the period to the extent that the revised book value does not exceed the book value that would have been recorded
without the impairment. Reversal of impairment of goodwill is not allowed.
(n) Income Tax and Deferred Income Tax
Income tax on the income or loss for the year comprises current and deferred tax. Income tax is recognized in the statement of income except
to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax is the expected tax
payable on the taxable income for the year, using tax rates enacted. Deferred tax is provided using the asset and liability method, providing
for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax
purposes.
The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at the end of the reporting period. A deferred tax asset is recognized only to the
extent that it is probable that future taxable income will be available against which the unused tax losses and credits can be utilized. Deferred
reporting period, and the resulting translation gains and losses are recognized in current operations.
(t) Share-based payments
In case of equity-settled share-based payment, the fair value of the goods or employee services received in exchange for the grant of the
options is recognized as an expense and a capital adjustment. If the fair value of goods or employee services cannot be estimated reliably, the
fair value is estimated based on the fair value of the equity granted.
For cash-settled share-based payment, the fair value of the obligation the Company will assume is determined by the fair value of the goods
or employee services received in exchange for the grant of the options. Until the liability is settled, the Company is required to measure
the fair value at the end of the reporting period and at settlement date. The change in fair value is recognized as an expense. Share-based
payment transactions with an option for the parties to choose between cash and equity settlement are accounted for based on the substance
of the transaction.
(u) Treasury Stock
Treasury stock is stated at cost. Gain on disposal of treasury stock is charged to capital surplus. Loss on disposal of treasury stock is first offset
against gain on disposal of treasury stock, if any, and the remainder is charged to capital adjustment, a component of shareholders’ equity.
tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Deferred tax assets and liabilities are classified as current or non-current based on the classification of the related asset or liability for financial
reporting or the expected reversal date of the temporary difference for those with no related asset or liability such as loss carryforwards and
3. Restricted Financial Instruments
Financial instruments which are restricted in use as of December 31, 2010 and 2009 are summarized as follows:
tax credit carryforwards. The deferred tax amounts are presented as a net current asset or liability and a net non-current asset or liability.
(o) Discount (Premium) on Debentures
The difference between the nominal value and proceeds from issuance of debentures, less incidental issuance cost, is presented under the
discounts on debentures account and is directly deducted from the nominal value of the related debentures.
Discount and premium on debentures are amortized over the redemption period of the related debenture using the effective interest method.
Amortization of discount or premium on debentures is recorded as interest expense.
(p) Valuation of Assets and Liabilities at Present Value
Receivables and payables resulting from on long-term installment payment transactions, long-term cash loans or other similar borrowings, are
Financial Instrument
Purpose of restriction
Short-term deposits
Business guarantee with Payment Gateway and guarantees of employee borrowings
Guarantee of NHN Japan Corp.'s borrowings
2010
2009
\4,000,000
\4,900,000
(단위: 천원)
32,636,175
-
\36,636,175
\4,900,000
4. Investments
(1) Trading Securities
Trading securities as of December 31, 2010 are summarized as follows:
valued at their present values, discounted at an appropriate discount rate when the difference between the nominal value and present value
is material. The present value discounts are amortized or recovered using the effective interest rate method and are recognized as interest
income or expense over the term of the contract.
Beneficiary certificates
077 /
Cost
Fair value
Book value
45,000,000
45,033,576
45,033,576
5. Equity Method Investments
(2) Available-for-sale securities
Available-for-sale securities as of December 31, 2010 and 2009 are summarized as follows:
2010
Acquisition cost
2009
Gain (loss) on
valuation of
available-for-sale
securities
2010
Carrying value
Carrying value
Equity securities *1
Next Venture Investment Associations
\50,000
\-
\-
\-
Pollever Corp.
100,000
-
-
-
Booktopia, Inc. *2
999,999
-
-
169,152
Purunichildcare Association
1,500,000
-
1,443,233
1,443,233
One Hour Com, Inc.
20,000
-
-
-
Globespan Capital Partners V, L.P.
711,454
-
711,454
628,981
Houyhnhnm Corp.
261,775
-
-
-
Npluto Co., Ltd.
109,791
-
-
-
09-7 Korea Venture Fund No.15
2,400,000
-
2,400,000
800,000
09-9 Hanmi New Growth Venture Fund
2,250,000
-
2,250,000
750,000
Toppig Co., Ltd
510,000
-
510,000
-
Polygon games Corp.
2,500,000
-
2,500,000
-
LSNetworks 2 redeemable convertible preferred stock B
683,165
80,613
763,778
-
12,096,184
80,613
10,578,465
3,791,366
12,500,000
-
12,500,000
12,500,000
6,131,436
23,495
6,154,931
-
Debt securities
Webzen, Inc.
Halla Engineering & Construction Group
Samsung Card Co., Ltd. *3
-
-
-
9,960,536
Shinhan Card Co., Ltd. *3
-
-
-
10,107,623
Lotte Chilsung Beverage Co., Ltd. *3
-
-
-
10,034,273
Korean Air Lines Co., Ltd. *3
-
-
-
13,064,421
Asiana Airlines, Inc.
Hynix Semiconductor Inc.
Ajuautorental Corp.
5,008,976
19,148
5,028,124
-
10,012,488
7,446
10,019,934
-
10,000,000
(47,718)
9,952,282
-
43,652,900
2,371
43,655,271
55,666,853
Others
Tong Yang First Class Investment Trust No. 2 *3
-
-
-
12,017,400
Entrusted Investments (Samsung Securities Co., Ltd.) *4
15,000,000
552,374
15,552,374
-
Entrusted Investments (Woori Investment & Securities Co., Ltd.) *4 15,000,000
855,903
15,855,903
-
Entrusted Investments (Boaz Asset Management Co., Ltd.) *4
9,994,855
176,150
10,171,005
-
Entrusted Investments (ASAM Investment Advisory) *4
10,000,000
320,524
10,320,524
-
Goldman Sachs Korea Securities Investment Trust No. 1
5,000,000
369,600
5,369,600
-
Goldman Sachs emerging market bond fund
5,000,000
(202,930)
4,797,070
-
Shinhan Maritime no.1 Private Equity Fund
5,603,617
-
5,603,617
-
Miraeassetnice Private Equity Fund
10,180,000
-
10,180,000
-
75,778,472
2,071,621
77,850,093
12,017,400
Deferred tax effects
(1) Equity method investments as of December 31, 2010 and 2009 are as follows:
-
399,399
-
-
\131,527,556
\1,755,206
\132,083,829
\71,475,619
Acquisition cost
Net asset value
Carrying value
Carrying value
23.80%
\3,099,950
\2,111,596
\2,111,596
\1,932,221
100.00%
21,485,413
13,256,997
13,504,088
13,459,307
Allat Corp.
20.00%
1,000,000
2,124,741
2,124,741
1,924,560
NetMania Co., Ltd.
27.17%
285,822
234,369
234,369
161,830
NHN Japan Corp.
100.00%
63,464,327
73,724,846
73,724,846
66,338,253
Investee
Mediaweb, Inc. *1
SearchSolution Corp.
Digital YTN
NHN Global Limited
Webzen, Inc. *2
Financial Review
50.00%
1,000,000
2,542,660
2,542,660
2,294,975
100.00%
112,215,020
14,682,620
14,682,620
9,346,052
11,310,226
28.50%
12,000,000
28,270,640
29,504,300
NHN China Corp.
100.00%
6,411,120
6,016,457
6,016,457
6,820,604
NHN USA, Inc.
100.00%
30,732,014
9,731,601
9,731,601
14,428,255
NHN Service, Inc. *3
100.00%
-
-
-
17,726,313
50.00%
38,377,000
37,421,891
37,421,154
38,038,817
NHN I&S *3
100.00%
7,100,000
33,621,726
26,009,043
2,229,971
Wingbus, Inc. *4
100.00%
-
-
-
1,974,838
Neowiz NHN Asset Management Co., Ltd.
N-Visions *5
100.00%
1,000,000
261,187
261,187
552,802
NHN Business Platform Corp.
100.00%
124,498,157
126,332,013
126,688,250
131,266,410
3,004,567
27.27%
3,000,000
2,978,915
2,978,915
NHN Investment Corp. *6
Stonebridge Early Stage Fund
100.00%
50,000,000
50,500,478
50,500,478
-
Game Marketing & Business Corp. *7
100.00%
500,000
406,755
406,755
-
Synapsoft Corp. *8
30.00%
1,499,995
1,094,837
1,657,209
Wisecat, Inc. *9
51.00%
40,800,016
162,104
40,800,016
\518,468,834
\405,476,433
\440,900,285
\322,810,001
*1
For the year ended December 31, 2010, the employees of Mediaweb Inc. exercised their stock option. As a result, the Company’s ownership interest
decreased from 24.2% to 23.8%, and recognized a loss on disposal of equity method accounted investments of \16 million.
*2NHN Games Corp. became an equity method accounted investment, through merger, with Webzen, Inc. on July 6, 2010. The purpose of which was to
diversify Webzen, Inc.’s game development portfolio and expansion of game publishing business. As a result, the Company recognized a gain on disposal of
equity method accounted investments of \19,849 million.
*3For the year ended December 31, 2010, NHN Service, Inc. merged into NHN I&S Corp. on May 3, 2010 for operation efficiency between subsidiaries. As a
result, the Company recognized a gain on disposal of equity method accounted investment of \918 million.
*4As of October 7, 2010, Wingbus, Inc., equity method accounted investee, was merged into the Company for the activation of mobile service and operation
efficiency by adding content for travel and famous restaurants. As a result, the Company recognized a loss on disposal of equity method accounted investment
of \1,429 million.
*5 For the year ended December 31, 2010, NHN Social Enterprise obtained certification as a 'Social Enterprise' from the Ministry of Employment and Labor, and
changed the company name to N-Visions.
*6 The Company established NHN Investment Corp., a wholly owned subsidiary, on April 12, 2010 with equity investment of \50,000 million.
*7 The Company established Game Marketing & Business Corp., a wholly owned subsidiary, on May 3, 2010 for operation expansion and business diversification
with equity investment of \500 million.
*8 The Company acquired 30% of equity of Synapsoft Corp. for \1,500 million on August 12, 2010 for successful development and operation of Naver Web
Office services.
*9 The Company acquired 51% of equity of Wisecat, Inc. for \40,800 million on October 28, 2010 to enter the sports game publishing and overseas sports game
market.
*1 A
vailable-for-sale securities except for LSNetworks 2 redeemable convertible preferred stock B were valued at their acquisition costs because the fair value of
the securities were not available.
*2 For the year ended December 31, 2010, Booktopia, Inc. went out of business. As a result, the Company recognized loss on impairment of available-for-sale
securities of \169 million as non-operating loss.
*3 For the year ended December 31, 2010, the Company disposed of all securities held of Samsung Card Co., Ltd., Shinhan Card Co., Ltd., Lotte Chilsung
Beverage Co., Ltd., Korean Air Lines Co., Ltd. and Tong Yang First Class Investment Trust No. 2. As a result, the Company recognized gain on disposal of
available-for-sale securities and loss on disposal of available-for-sale securities of \554 million and \103 million, respectively, as non-operating income (loss).
*4 For the year ended December 31, 2010, the Company entered into entrusted investment contracts with Samsung Securities Co., Ltd., Woori Investment
& Securities Co., Ltd., Boaz Asset Management Co., Ltd. and ASAM Investment Advisory and the portfolio is composed of equity securities, beneficiary
certificates and bonds.
078 / 2009
Percentage of
ownership
079 /
(2) Changes in goodwill for equity method accounted investments for the year ended December 31, 2010 are as follows:
Company
Balance at
January 1,
2010
Increase
(decrease)
Amortization
Others
Balance at
December 31,
2010
\329,454
\-
\82,363
\-
\247,091
(1,327)
-
(590)
-
(737)
1,759,367
-
329,881
(1,429,486)
-
Wingbus, Inc.
Synapsoft Corp.
-
591,971
29,599
-
562,372
Wisecat, Inc.
-
40,717,343
-
-
40,717,343
\2,087,494
\41,309,314
\441,253
(\1,429,486)
\41,526,069
(5) Summarized financial information of equity method accounted investments, which represents 100% of the entities’ balances,
as of December 31, 2010 was as follows:
Investee
Mediaweb, Inc.
Company
Property and equipment, etc.
Net income
(loss)
\517,216
\111,790
\741,265
13,618,027
361,029
2,166,000
127,144
Allat Corp.
21,031,182
10,407,475
32,964,516
(959,056)
NetMania Co., Ltd.
NHN Japan Corp.
Digital YTN
NHN China Corp.
Webzen, Inc.
Sales
\8,984,458
Webzen, Inc.
Total
liabilities
NHN Global Limited
(3) Details of eliminated unrealized gains (losses) from inter-company transactions as of December 31, 2010 are as follows:
Total
assets
NHN USA, Inc.
1,361,155
498,684
1,802,361
204,772
231,187,768
157,462,922
179,190,677
897,250
5,577,199
491,880
5,261,457
682,809
17,438,671
2,756,051
-
27,575,362
134,615,767
35,433,453
37,095,976
(3,479,272)
6,600,162
583,705
13,980,586
(853,222)
11,048,858
1,317,257
10,282,661
(4,408,187)
6,600,162
583,705
-
(853,222)
48,783,985
15,162,258
36,345,148
3,229,140
(\1,233,660)
NHN I&S
NHN I&S
7,612,683
N-Visions
411,114
149,927
868,467
(291,615)
(356,237)
355,185,574
228,853,561
345,064,883
(3,718,173)
10,922,690
-
148,502
(64,523)
NHN Investment Corp.
51,008,767
508,289
2,133,453
793,092
504,611
97,856
750,489
(93,245)
4,461,581
819,013
2,271,684
752,546
12,564,676
12,402,572
9,738,941
(5,158,756)
(4) Changes in book value of equity method accounted investments for the year ended December 31, 2010 are as follows:
Game Marketing & Business Corp.
Investee
Mediaweb, Inc.
Beginning
balance
Gain (loss) on
valuation of equity
Acquisitions method accounted
(disposals)
investments
Wisecat, Inc.
Capital
changes
Others
Ending
balance
\1,932,221
(\15,551)
\180,843
\14,083
\-
\2,111,596
13,459,307
-
44,781
-
-
13,504,088
1,924,560
-
(212,633)
412,814
-
2,124,741
161,830
-
72,539
-
-
234,369
66,338,253
-
897,250
6,489,343
-
73,724,846
Digital YTN
2,294,975
-
247,685
-
-
2,542,660
NHNGlobal Limited
9,346,052
-
27,575,362
520,722
(22,759,516)
14,682,620
11,310,226
19,849,558
329,101
(1,984,585)
-
29,504,300
Allat Corp.
NetMania Co., Ltd.
NHN Japan Corp.
Webzen, Inc.
NHN China Corp.
6,820,604
-
(853,222)
49,075
-
6,016,457
NHN USA, Inc.
14,428,255
-
(4,408,187)
(288,467)
-
9,731,601
NHN Service, Inc.
17,726,313
(19,042,596)
1,661,902
(345,619)
-
-
Neowiz NHN Asset
Management Co., Ltd.
38,038,817
-
(617,663)
-
-
37,421,154
NHN I&S
2,229,971
19,960,321
3,699,565
119,186
-
26,009,043
Wingbus, Inc.
1,974,838
(356,119)
(1,618,719)
-
-
-
552,802
-
(291,615)
-
-
261,187
126,688,250
N-Visions
131,266,410
-
(4,577,383)
(777)
-
3,004,567
-
(25,652)
-
-
2,978,915
-
50,000,000
793,092
(292,614)
-
50,500,478
NHN Investment Corp.
Game Marketing & Business Corp.
-
500,000
(93,245)
-
-
406,755
Synapsoft Corp.
-
1,499,995
157,214
-
-
1,657,209
Wisecat, Inc.
080 / -
40,800,016
-
-
-
40,800,016
\322,810,001
\113,195,624
\22,961,015
\4,693,161
\(22,759,516)
\440,900,285
Financial Review
Synapsoft Corp.
081 /
6. Transactions and Balances with Related Companies
(3) Account balances with related companies as of December 31, 2010 and 2009 were as follows:
(1) Details of parent and subsidiary relationships as of December 31, 2010 were as follows:
Receivables *1
Companies
Subsidiary
Relationship
Name
Subsidiary
NHN Japan Corp.
NHN USA, Inc.
NHN Japan Corp., NHN USA, Inc., NHN Global Limited, SearchSolution Corp.,
NHN Business Platform Corp., NHN Investment Corp., Wisecat, Inc., Livedoor Corp.
Equity-method investees
NHN Business Platform Corp. *2
Digital YTN, Mediaweb, Inc., Allat Corp., NetMania Co., Ltd., NHN I&S,
Neowiz NHN Asset Management Co., Ltd., N-Visions, Stonebridge Early Stage Fund,
NHN China Corp., Game Marketing & Business Corp., Webzen, Inc., Synapsoft Corp.
Others
Digital YTN
Mediaweb, Inc.
Next Human Search Technology Corporation
Allat Corp.
NetMania Co., Ltd.
Neowiz NHN Asset
Management Co., Ltd.
(2) Significant transactions which occurred in the normal course of business with related companies for the years ended
December 31, 2010 and 2009 were as follows:
NHN I&S
Relationship
Name
Subsidiary
NHN Japan Corp.
Transaction
2010
2009
Sales
\4,519,395
\4,048,566
Purchases
587,716
2,007,242
NHN USA, Inc.
Sales
-
2,489
Purchases
396,564
312,630
SearchSolution Corp. *1
Sales
71,906
72,852
Purchases
2,166,000
4,389,860
Sales
2,188,701
2,308,477
Purchases
142,831,592
82,341,362
Digital YTN
2009
\1,090,305
2,230
2,346
393,090
606,113
27,577
13,023
240,809
358,600
130,635,368
150,281,470
20,207,985
12,511,521
105,200
73,700
52,167
42,167
-
749,895
-
285,973
1,375,612
1,295,763
-
-
450
-
2,174
4,065
3,300,000
1,200,000
-
-
532,862
544,314
7,852,508
5,800,690
-
-
2,260,342
33,647
14,464,384
4,544,684
629,381
2,012,714
\151,875,638
\160,441,669
\35,460,865
\22,745,795
Webzen, Inc.,
*1
Receivable is stated at net of allowance for doubtful accounts. Allowance for doubtful accounts were \27 million and \108 million as of December 31, 2010
and 2009, respectively.
*2
Amount as above includes part of advertisement income that is payable to the Company which NHN Business Platform Corp. received from advertisers.
(4) Key management personnel compensation for each of the following categories for the years ended December 31, 2010 and
2009 were as follows:
400,000
341,645
483,941
Sales
-
28,648
Purchases
740,981
4,329,116
2010
2009
Sales
1,255,580
-
Short-term salaries
9,843
5,470
Purchases
1,405,713
4,698,367
Severance benefits
4,072
490
Purchases
16,500
130,149
Sales
2,805,879
6,475,863
Purchases
58,457,484
67,721,878
Purchases
6,738,445
20,967,016
Sales
1,464,401
586,907
Purchases
16,408,098
17,643,279
Purchases
10,644,295
7,095,500
Sales
\12,705,862
\13,865,447
Purchases
240,873,662
212,120,340
Webzen, Inc.
Next Human Search Technology Corporation
2010
\3,822,409
480,274
NHN I&S
Other
2009
\1,736,474
Sales
Allat Corp.
NHN China Corporation
2010
\1,431,955
Purchases
Mediaweb, Inc.
NetMania Co., Ltd.
NHN China Corp.
Payables
Amount
Stock compensation expenses
-
890
13,915
6,850
(5) Guarantees provided on behalf of related companies as of December 31, 2010 are summarized as follows:
Related company
Contents
Guaranteed amount
Beneficiary
NHN Japan Corp.
Long-term borrowings*
90,810,200
Shinhan Bank,
Sumitomo Mitsui
Banking Corporation
* Long-term borrowings as above were recognized in the financial statements of NHN Japan Corp.
(6) The following assets were pledged as collateral for long-term borrowings of NHN Japan Corp. as of December 31, 2010.
Asset
Short-term Deposits
083 /
Lender
Type of
borrowings
Borrowing
amount
Collateralized
Sumitomo Mitsui Banking Corporation
Long-term borrowings
90,810,200
32,636,175
7. Property and Equipment
8. Insurance
(1) Property and equipment as of December 31, 2010 and 2009 are summarized as follows:
As of December 31, 2010, furniture and fixtures were insured against damage up to ₩\10,681 million.
Buildings, net
Structures, net
Furniture and fixtures, net *1
Accumulated depreciation
Construction-in-progress
Land
2010
2009
\164,194,327
\623,004
9,157,764
-
33,965,096
29,711,387
207,317,187
30,334,391
(27,791,279)
(18,771,219)
179,525,908
11,563,172
5,285,829
134,067,721
63,398,515
46,213,404
\248,210,252
\191,844,297
9. Intangible Assets
(1) Changes in intangible assets for the year ended December 31, 2010 were as follows:
Net balance at beginning of year
Additions
Amortization
Net balance at end of year
Goodwill
Software
Others
Total
\1,873,228
\-
\5,434,684
\13,939,367
\21,247,279
11,404,839
434,294
1,790,000
691,657
8,488,888
(674,730)
(270,000)
(2,037,585)
(4,588,747)
(7,571,062)
\1,632,792
\1,520,000
\4,088,756
\17,839,508
\25,081,056
*1 Government subsidies were offset against the purchase price.
(2) Changes in property and equipment for the year ended December 31, 2010 were as follows:
(2) Changes in property and equipment for the year ended December 31, 2010 were as follows:
Land
Buildings
Structures
Beginning balance
Acquisitions
Disposals
Depreciation
Other
Ending balance
\46,213,404
\3,093,750
621,707
20,534,328
\-
\-
\14,091,361
\63,398,515
-
(4,527,045)
143,036,994
159,665,984
-
786,164
-
(734,193)
8,371,600
8,423,571
10,941,465
5,914,296
(313,374)
(6,812,834)
1,706,800
11,436,353
134,067,721
38,424,863
-
-
(167,206,755)
5,285,829
\191,844,297
\68,753,401
(\313,374)
(\12,074,072)
\-
\248,210,252
Buildings
Machinery
Vehicles
Beginning balance
Acquisitions
Disposals
Depreciation
Other
Ending balance
\38,596,921
\21,195
\-
\-
\7,595,288
\46,213,404
-
623,005
-
(1,298)
-
621,707
82,463,173
7,183,170
(78,519,368)
(11,126,975)
-
-
2,617
-
(2,349)
(268)
-
-
17,154,917
3,716,766
(2,807,740)
(7,122,478)
-
10,941,465
50,097,700
91,565,309
-
-
(7,595,288)
134,067,721
\188,315,328
\103,109,445
(\81,329,457)
(\18,251,019)
\-
\191,844,297
Others
Total
\12,017,567
\7,640,332
\21,231,680
Additions
963,542
2,966,362
10,777,020
14,706,924
Amortization
(557,637)
(2,617,608)
(3,339,222)
(6,514,467)
Disposals
(106,458)
(6,931,637)
(1,138,763)
(8,176,858)
\1,873,228
\5,434,684
\13,939,367
\21,247,279
Net balance at end of year
Debentures as of December 31, 2010 and 2009 are summarized as follows:
Issue date
Maturity date
Annual interest rate
2010
2009
1st (Private placement)
2007. 9.11
2010. 9.10
5.87%
\-
\80,000,000
1st (Public offering)
2010. 8.14
2013. 8.13
4.56%
100,000,000
-
-
(26,762)
\100,000,000
\79,973,238
Less: discount
The debentures bear interest, which is generally payable quarterly, with its principal payable at maturity.
(4) The officially declared value of land at December 31, 2010, as announced by the Minister of Construction and Transportation,
was \49,020 million.
084 / Software
\1,573,781
10. Debenture
3) Changes in property and equipment for the year ended December 31, 2009 were as follows:
Land
Net balance at beginning of year
Financial Review
085 /
11. Long-term Borrowings
13. Assets and Liabilities Denominated in Foreign Currency
In association with NHN USA, Inc., the Company entered into a 'Game Project Financing' agreement in May 2007 with Golden Bridge
Asset Management Co., Ltd. and Korea Securities Finance Corp. (the Investors) in order to invest in publishing games. In accordance with
the agreement, the Company will be able to request the investors to invest up to \25 billion in the service rights for game titles, with the
revenues from the provision of the game titles to be shared with the investors.
Assets and liabilities denominated in foreign currencies as of December 31, 2010 and 2009 are summarized as follows:
As of December 31, 2010 and 2009, the Company has received a total of \25,024 million and \24,324 million as borrowings from investors.
The outstanding balance is presented as long-term borrowings in the statement of financial position.
The long-term borrowings from the investors are repaid by settling the contribution margin (total monthly sales from invested games less
expenses) based on the agreed rates applied to accumulated revenues shared with the Investors.
As of December 31, 2010, the outstanding investors’ shares in the sales of the games include the principal amount of \15,431 million and
interest payable of \1,093 million, with \230 million already paid on the principal and \36 million already paid on the interest.
2010
2009
Foreign
currency
Translation
into Won
Foreign
currency
Translation
into Won
USD
8,500,591.42
\9,681,324
JPY
94,139,827.00
1,315,209
USD
3,611,577.55
\4,216,117
JPY
65,212,714.00
USD
-
823,520
-
USD
8,310.24
JPY
9,703
-
-
JPY
472,076.64
5,961
EUR
-
-
EUR
6.66
11
USD
24,429.95
27,823
USD
106.40
124
JYP
58,981,100.02
824,013
JYP
761,217.00
9,717
CNY
3,212,643.70
554,181
CNY
5,807,742.56
993,472
Assets
Cash and cash equivalents
Non-trade receivables
Accounts receivable - trade
Total foreign currency denominated assets
\12,402,550
\6,058,625
Liabilities
12. Retirement and Severance Benefits
Non-trade payables
Changes in retirement and severance benefits for the years ended December 31, 2010 and 2009 were as follows:
USD
341,370.97
\388,787
USD
623,028.35
\727,448
JPY
735,000.00
10,269
JPY
1,397,558.27
17,649
CNY
13,609,246.27
2,347,595
CNY
26,924,405.58
4,605,689
EUR
-
-
EUR
65,202.93
109,168
2010
2009
GBP
-
-
GBP
10,923.26
20,511
\30,697,844
\27,054,508
CHF
-
-
CHF
8,361.40
9,419
Payments
(8,019,558)
(8,152,737)
HKD
-
-
HKD
121,167.87
18,243
17,386,985
16,023,364
ILS
-
-
ILS
18,840.08
5,795
Transfer to related company
(1,209,049)
(4,227,291)
PHP
-
-
PHP
645,218.96
16,343
RUB
-
-
RUB
451,788.36
Estimated retirement and severance benefits at beginning of year
Estimated retirement and severance benefits at the end of year
Deposit for severance benefits insurance
38,856,222
30,697,844
(28,369,994)
(21,991,090)
\10,486,228
\8,706,754
The Company maintains an employees’ severance benefit trust arrangement with Samsung Life Insurance Co., Ltd. Under this arrangement,
the Company has made a deposit in the amount equal to 73.01% and 71.64% of the reserve balances of retirement and severance benefits as
of December 31, 2010 and 2009, respectively. This deposit is to be used to guarantee the required payments to the retirees and is accounted
for as a reduction in the reserve balance.
Total foreign currency denominated liabilities
\2,746,651
17,403
\5,547,668
The Company recognized foreign currency translation gain amounting to \65 million as non-operating income and foreign currency
translation loss amounting to \84 million as non-operating expense.
087 /
14. Commitments and Contingencies
16. Treasury Stocks
(a)The Company has borrowing agreements totaling \130,000 million with Shinhan Bank, Hana Bank and Kookmin Bank as of December 31,
2010.
As of December 31, 2010, the Company has 3,298,230 shares of common stock held as treasury stock for the stabilization of shares and the
exercise of stock options, with a total carrying value of \634,820 million, accounted as a capital adjustment.
(b)The Company is defending an action brought by Hyundai Engineering & Construction Co., Ltd. which constructed the Company’s
headquarters during the current year, claiming damages of \32,594 million. Among the amount of litigation, the Company paid a deposit
of \20,086 million in Seoul Western District Court and Hyundai Engineering & Construction Co., Ltd. withdrew the amount.
As of December 31, 2010, except the above lawsuit the Company is involved in 10 lawsuits for alleged damages aggregating to \395
million. The ultimate outcome of the above lawsuits cannot yet be determined. The Company believes that although the outcome of these
legal actions is uncertain, they would not ultimately result in a material effect on the Company’s financial position, operating results or cash
flows.
(c)For the year ended December 31, 2010, the Company transferred the outstanding balance of trade accounts and notes receivable
amounting to \210,586 million, \18,488 million of which has not matured as of December 31, 2010.
17. Income Taxes
(1) The components of income tax expense for the years ended December 31, 2010 and 2009 were as follows:
Current income tax
Deferred income tax by temporary differences
Deferred income tax by spin-off
Items charged directly to stockholders’ equity
(d)As of December 31, 2010, the Company is covered by a management indemnity obligation insurance of \50,000 million and property
damages insurance coverage of \10,681 million from Samsung Fire & Marine Insurance Co., Ltd. and other medical insurance from LIG
Income tax expense
2010
2009
\145,674,973
\125,080,906
4,436,898
(3,274,713)
-
(2,853,012)
386,281
4,396,604
\150,498,152
\123,349,785
Insurance Co., Ltd.
(e)As of December 31, 2010, the Company has guarantees of \1,663 million relating to deposits, authorization, and performance guarantees
from Seoul Guarantee Insurance.
(f)For the year ended December 31, 2010, the Company and NHN Business Platform Corp. contracted that NHN Business Platform Corp.
will provide an advertisement platform from May 1, 2009 to April 30, 2011. According to the contract, NHN Business Platform Corp. will
provide services such as overall planning, development, operation, sales and purchases of the products, monitoring, marketing, policy
making for search advertisement and display advertisement during the contract period. The Company and NHN Business Platform Corp.
share a stated percentage of the amount earned from the search advertisement and display advertisement. Also, the Company and NHN
Business Platform Corp. contracted with NHN Business Platform Corp. for the provision of IT infrastructure services from May 1, 2009 to
April 30, 2011. According to the contract, NHN Business Platform Corp. will provide IDC, server, database, networks, securities, CDN and
supplementary services during the contract period and the Company pays monthly commitment fees.
(g)The Company entered into publishing agreements with major game developing companies for exclusive rights and profit sharing in order
to secure competitive games.
(h)The Company entered into an agreement with the Korea Professional Baseball Players Association for the period from January 1, 2011 to
December 31, 2015 for the exclusive right of publicity of specific players who can be applied in game services.
(i)During the acquisition of Wisecat, Inc., the Company granted purchase options to eight shareholders ("transferors") including the largest
shareholder. The rights of the options will be discharged as Wisecat, Inc. passes the screening in preparation for going public on the
KOSPI or KOSDAQ by December 31, 2014. Also, the Company can deny the rights of the options and in this case, the transferors can
demand that the Company should sell the shares up to two percent of the total issued shares.
(2) The income tax expense calculated by applying statutory tax rates to the Company’s income before income taxes differs from the actual
tax expense in the non-consolidated statements of income for the years ended December 31, 2010 and 2009 for the following reasons:
Income before income taxes
Expense for income taxes at normal tax rates
Non-taxable income
Non-deductable expense
Tax credit
Changes of deferred tax assets with uncertain
probability of realization
Others
Income tax expense
Effective tax rate
\545,043,705
155,991,016
131,876,377
(1,570)
(1,987,944)
942,733
498,531
(736,934)
(601,735)
(6,533,744)
(1,937,390)
836,651
(4,498,054)
\150,498,152
\123,349,785
23.34%
22.63%
Temporary
differences
Unrealized gain on valuation of available-for-sale securities
15. Stockholders’ Equity
The Company authorized to issue 300 million common shares with a par value \500 per share. As of December 31, 2010, the Company’s paid
in capital amounted to \24,064 million and the number of common stock issued and outstanding was 48,127,704 shares.
Financial Review
2009
\644,700,066
(3) Income tax expense and deferred tax assets and liabilities that were directly charged or credited to accumulated other comprehensive
income as of December 31, 2010 are as follows:
Unrealized gain on disposal of treasury stock
088 / 2010
089 /
Tax
expense
Deferred tax assets
(liabilities)
\1,868,737
\-
(\330,995)
14,023,694
(717,276)
-
\15,892,431
(\717,276)
(\330,995)
(4) In accordance with SKAS No. 16 Income Taxes, deferred tax amounts should be presented as a net current asset or liability and a net noncurrent asset or liability. In addition, the Company is required to disclose gross deferred tax assets. As of December 31, 2010, details of
gross deferred tax assets are as follows:
18. Earnings per Share
(1) Basic earnings per share for the years ended December 31, 2010 and 2009 were as follows:
(In KRW, except share information)
Deferred tax assets
(liabilities)
Temporary
differences
at December 31, 2010
Accounts receivable
Net income
Beginning balance
Ending balance
\14,516,438
\3,193,616
\3,193,616
1,905,618
Allowance for doubtful accounts
7,874,454
2,464,991
Available-for-sale securities
196,207
472,074
43,166
Equity method investments
130,276,383
34,973,140
28,660,804
Intangible assets
5,152,897
1,045,859
1,133,637
Accrued bonuses
46,427,984
14,665,757
11,235,572
-
847,000
-
1,353,207
(296,859)
222,523
205,797,570
57,365,578
46,394,936
Accrued expenses
Others
Unrecognized deferred tax assets with
uncertain probability of realization *1
Net deferred tax asset
35,679,928
29,146,184
\21,685,650
\17,248,752
*1
The Company did not recognize deferred tax assets in the amount of \29,146 million arising from the taxable differences of equity method investments as of
December 31, 2010, since the temporary difference will not reverse in the foreseeable future.
(5) The gross balances of deferred tax assets and liabilities as of December 31, 2010 and 2009 are as follows:
2010
Current
Non-current
2010
2009
\494,201,913,672
\421,693,920,075
44,829,937
45,309,391
\11,024
\9,307
Weighted average number of common shares outstanding
Basic earnings per share
Weighted average number of common shares outstanding:
Account
Period
Common stock issued
Weighted number of shares
Balance, January 1, 2010
2010.01.01~2010.12.31
45,169,665
16,486,927,725
Effect of stock options exercised
2010.01.01~2010.12.31
622,363
65,399,239
Purchase of treasury stock
2010.01.01~2010.12.31
(962,554)
(189,399,871)
Balance, December 31, 2010
16,362,927,093
Period
Weighted average number of common shares
2010.01.01~2010.12.31
16,362,927,093 ÷ 365 = 44,829,937
Account
Period
Common stock issued
Weighted number of shares
Balance, January 1, 2009
2009.01.01 ~ 2009.12.31
45,273,168
16,524,706,320
Effect of stock options exercised
2009.03.23 ~ 2009.12.31
376,497
44,377,156
Purchase of treasury stock
2009.09.24 ~ 2009.12.31
(480,000)
(31,155,920)
Balance, December 31, 2009
16,537,927,556
2009
Period
Deferred
tax assets
Deferred
tax liabilities
Total
Deferred
tax assets
Deferred
tax liabilities
Total
\16,460,377
(\952,584)
\15,507,793
\21,464,999
(\737,312)
\20,727,687
9,860,196
(8,119,237)
1,740,959
957,963
-
957,963
\26,320,573
(\9,071,821)
\17,248,752
\22,422,962
(\737,312)
\21,685,650
Weighted average number of common shares
2009.01.01~2009.12.31
16,537,927,556 ÷ 365 = 45,309,391
(2) Diluted earnings per share for the years ended December 31, 2010 and 2009 were as follows:
(In KRW, except share information)
Net income
Weighted-average number of common shares outstanding
Weighted-average number of dilutive security common shares in circulation
Diluted earnings per share
091 /
2010
2009
\494,201,913,672
\421,693,920,075
44,829,937
45,309,391
271,153
404,937
\10,958
\9,225
19. Share-based Payments
20. Comprehensive Income
Pursuant to the articles of incorporation of the Company, the Company is allowed to grant stock options to its directors and employees up
to 15% of the total shares issued. In accordance with the resolutions of the Board of Directors and the general meeting of shareholders, the
Company granted stock options to its directors and employees to purchase shares of the Company as follows. The vesting period is within
five years from two years after the date granted and the exercise conditions include that directors and employees have to be in service at the
exercise date.
Comprehensive income for the years ended December 31, 2010 and 2009 were as follows:
The number and weighted average exercise prices of share options as of December 31, 2010 were as follows:
(In KRW, except number of options)
Date of grant
Number
originally
granted *1
Number
exercised
Number not
exercised
Resolution
Exercise Price
2005.03.28
35,000
35,000
-
General meeting of shareholders
\29,096
2006.03.29
448,513
448,513
-
89,830
2006.04.27
29,710
14,240
15,470
Board of directors
105,549
2006.11.07
62,560
47,290
15,270
Board of directors
96,500
2007.03.23
196,465
77,320
119,145
134,000
772,248
622,363
149,885
\99,460
\92,768
\127,243
Weighted-average exercise price
Net income
2010
2009
\494,201,914
\421,693,920
4,482,398
(6,024,796)
210,762
(386,854)
Other comprehensive income
Capital changes in equity method investees
Change in equity in equity method investees
Increase in valuation gain on available-for-sale securities
(tax effect: \(330,995) thousand in 2010 and \(68,404) thousand in 2009)
Comprehensive income
1,537,742
217,464
\500,432,816
\415,499,734
21. Date of Authorization for Issue
The 2010 financial statements as of and for the year ended December 31, 2010, were authorized for issue on February 9, 2011, at the Board
of Directors meeting.
*1
Number of shares originally granted includes an adjustment of free issuance of new shares, paid-in capital increase and exercised stock options.
22. Value Added Information
The weighted-average stock price per share measured on the exercise date is \204,198 The weighted-average remaining expected exercise
period, from December 31, 2010, until expiration is 3.09 years.
Details of compensation expenses recognized for the years ended December 31, 2010 and 2009 were as follows:
2010
2009
Current period
Cost of sales
Selling and administrative expense
Remaining expense to be recognized in the future years
Details of accounts included in the computation of value added for the years ended December 31, 2010 and 2009 are as follows:
2010
2009
\199,207,789
\214,871,238
17,386,985
16,023,364
Welfare
19,585,944
23,315,710
Rent
10,311,369
16,101,296
Salaries
\-
\610,403
Depreciation
12,074,072
18,251,019
-
279,768
Amortization
7,571,062
6,514,467
-
-
Taxes and dues
2,927,145
2,381,824
\-
\890,171
\269,064,366
\297,458,918
093 /
23. Segment Information
27. Planning and Adoption of K-IFRS (Korean International Financial Reporting Standards)
(1) The Company had distinguished its operating segments into search advertising, display advertising, games and others. Due to the inherent
nature of the Company’s businesses, the main clients of the Company are numerous internet users and advertisers.
The Financial Supervisory Commission announced the roadmap for the adoption of K-IFRS in March 2007, and the Company subsequently
plans to issue financial statements prepared in accordance with K-IFRS from 2011. In April 2009, the Company organized a Task Force Team
to conduct internal training, and in July 2009, the Company engaged with external advisors to analyze the main differences between K-GAAP
and K-IFRS. On the basis of analyzing results, the Company is processing additional consideration in order to make a reasonable alternative
that is practicable for the Company. The Company intends to establish accounting systems to apply the new accounting treatments as they
are finalized.
Operating revenue information, by segment, for the years ended December 31, 2010 and 2009 are as follows:
2010
Search advertising
2009
Amount
Percentage
of sales
Amount
Percentage
of sales
\736,860,234
56.14%
632,338,144
51.11%
Display advertising
145,090,418
11.06%
150,401,427
12.16%
Games
422,249,550
32.17%
446,666,748
36.11%
Others
8,305,531
0.63%
7,704,597
0.62%
\1,312,505,733
100.00%
\1,237,110,916
100.00%
Due to the inherent nature of the Company’s business, cost of sales, selling, general and administrative expenses and property and equipment
information are not presented by segment.
The preparation of financial statements under K-IFRS is mandatory for all listed companies in the Republic of Korea from 2011. Information on
the Company’s K-IFRS adoption plan and the current status of progress is as follows:
(a) Differences between accounting under K-IFRS and under K-GAAP expected to have a material effect on the Company are as follows:
Area
K-IFRS
Current K-GAAP
Borrowing
costs
K-IFRS 1023 (Borrowing Costs) will not be applied
retroactively to qualifying assets occurring prior to
January 1, 2010 (the date of transition to K-IFRS).
-
Cumulative
translation
differences
The cumulative translation difference of foreign
operations as of January 1, 2010 (the date of transition
to K-IFRS) will be regarded as nil.
-
Employee
benefits
All cumulative actuarial gains on defined benefit plans
as of January 1, 2010 (the date of transition to K-IFRS)
will be recognized as equity.
-
Scope of consolidated financial statements
Consolidated financial statements include all
subsidiaries which the parent company has control
over.
In accordance with the External Audit Law,
a company with assets of less than \10 billion shall
be excluded from consolidation.
Investment in subsidiaries and associates
Apply the cost method in separate financial
statement.
Apply the equity method.
Annual leave and long-term bonus payment
The Company recognizes an accrual for annual leave
and long-term employee bonus incurred in the period
in which the services are provided.
The Company recognizes accrual for leave and
long-term employee bonus to be estimated as
cash payment.
Goodwill and intangible assets with
indefinite useful life
Goodwill and intangible assets with indefinite useful
life are not amortized while tested for impairment at
the end of each reporting period.
Goodwill and intangible assets with indefinite useful
life are amortized for its useful life using straight-line
method.
First-time adoption of
K-IFRS
(2) Since the Company’s major portion of revenues is generated from domestic sales, revenue information by geographic segment is not
subject to reporting. Accordingly geographic segment information is not presented in this report.
24. Changes on Accounting Estimates
The Company changed the estimated useful lives for IT equipment from four years to three years in order to properly reflect the economic
substance of the asset and increase the usefulness of the accounting information. As a result, the depreciation expense for the years ended
December 31, 2010 increased by \1,086 million.
25. Results of Operations for the Last Interim Period
Sales
2010 4th Quarter
2009 4th Quarter
\331,108,417
\321,295,049
Operating income
150,840,093
145,679,760
Net income for the period
133,862,730
107,325,533
\2,993
\2,371
Earnings per share (in won)
(b) The Company is required under K-IFRS to present consolidated financial statements. Changes in the scope of consolidation from K-GAAP
to K-IFRS as of December 31, 2010 are as follows:
Consolidated Subsidiaries under K-GAAP
Consolidated Subsidiaries under K-IFRS
Difference
NHN Japan Corp., NHN USA, Inc.,
NHN Global Limited, SearchSolution Corp.,
NHN Business Platform Corp.,
NHN Investment Corp., Wisecat, Inc.,
Livedoor Corp.
NHN Japan Corp., NHN USA, Inc.,
NHN Global Limited, SearchSolution Corp.,
NHN Business Platform Corp.,
NHN Investment Corp., Wisecat, Inc.,
Livedoor Corp.
No difference.
26. Subsequent Events
On January 3, 2011, the Company invested \20 billion as initial capital and incorporated Orange Crew Corp., a wholly owned subsidiary of
the Company
-
095 /
NHN I&S, InComms Corp., Gplus Corp.,
Under K-IFRS, consolidated financial statements
Greenweb Service Corp.,
include subsidiaries with assets of less than
\10 billion which were excluded under K-GAAP.
NHN Services China Corp., NHN China Corp.,
Naver Japan Corp., NHST Japan Corp.,
NHST China Corp., Mediator Corp., Jlisting Corp.,
Livedoor Career Corp., NPHK Limited,
NHN serch marketing Corp., Itopf Corp., N-Visions,
Game Marketing & Business Corp.,
Studio hon Corp.
Report of Independent Auditor’s Review of
Internal Accounting Control System
English translation of a Report Originally Issued in Korean
To the President of
NHN Corporation:
We have reviewed the accompanying Report on the Operations of Internal Accounting Control System ("IACS")
A company’s IACS is a process designed to provide reasonable assurance regarding the reliability of financial
of NHN Corporation (the "Company") as of December 31, 2010. The Company’s management is responsible
reporting and the preparation of financial statements for external purposes in accordance with generally
for designing and maintain effective IACS and for its assessment of the effectiveness of IACS. Our responsibility
accepted accounting principles. Because of its inherent limitations, however, IACS may not prevent or detect
is to review management’s assessment and issue a report based on our review. In the accompanying report
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
of management’s assessment of IACS, the Company’s management stated: "Based on the assessment on the
controls may become inadequate because of change in conditions, or that the degree of compliance with the
operations of the IACS, the Company’s IACS has been effectively designed and is operating as of December 31,
policies or procedures may deteriorate.
2010, in all material respects, in accordance with the IACS Framework issued by the Internal Accounting Control
Based on our review, nothing has come to our attention that the Report on the Operations of Internal Accounting
System Operation Committee."
Control System as of December 31, 2010 is prepared in all material respects, in accordance with IACS Framework
We conducted our review in accordance with IACS Review Standards, issued by the Korean Institute of Certified
issued by the Internal Accounting Control System Operation Committee.
Public Accountants Those Standards require that we plan and perform the review to obtain assurance of a level
less than that of an audit as to whether the Report on the Operations of Internal Accounting Control System is
This report applies to the Company’s IACS in existence as of December 31, 2010. We did not review the
free of material misstatement. Our review consists principally of obtaining an understanding of the Company’s
Company’s IACS subsequent to December 31, 2010. This report has been prepared for Korean regulatory
IACS, inquiries of company personnel about the details of the report, and tracing to related documents we
purposes, pursuant to the External Audit Law, and may not be appropriate for other purposes or for other users.
considered necessary in the circumstances. We have not performed an audit accordingly, we do not express an
audit opinion.
Seoul, Korea
February 24, 2011
Notice to Readers
This report is annexed in relation to the audit of the non-consolidated financial statements as of December 31, 2010 and the review of internal accounting
control system pursuant to Article 2-3 of the Act on External Audit for Stock Companies of the Republic of Korea.
097 /
Report on the Operations
of the Internal Accounting Control System
To the Board of Directors and Audit Committee of
NHN Corporation:
I, as the Internal Accounting Control Officer ("IACO") of NHN Corporation ("the Company"), assessed the status
The Company’s management, including IACO, is responsible for designing and operating IACS. I, as the IACO,
of the design and operations of the Company’s internal accounting control system ("IACS") for the year ended
assessed whether the IACS has been effectively designed and is operating to prevent and detect any error or
December 31, 2010.
fraud which may cause any misstatement of the financial statement, for the purpose of establishing the reliability
of financial reporting and the preparation of financial statements for external purpose. I, as the IACO, applied the
IACS standard for the assessment of design and operations of the IACS.
Based on the assessment on the operations of the IACS, the Company’s IACS has been effectively designed and
is operating as of December 31, 2010, in all material respects, in accordance with the IACS standards.
February 9, 2011
In-Joon Hwang,
Internal Accounting Control Officer
Sang-Hun Kim,
Chief Executive Officer
099 /
/ No. of NHN's Affiliates
33 (as of the end of December 2010)
Major
NHN
Shareholders
Ownership
Search Solution
/ SEARCHES
/ ONLINE ADVERTISING
Search Solution
NHN Business Platform (NBP)
Search Solution is a leading Korean search
NHN spun off its online advertisement sales
engine development company that carries
out technology R&D for search engines,
/ OVERSEAS INVESTMENT
/ FOUNDATION CORPORATION
Wise Cat
NHN Japan
NHN Cultural Foundation
Wise Cat developed the online baseball
NHN Japan operates Japan’s largest online
NHN Cultural Foundation supports the
and marketing platform divisions, along with
game, "Slugger." NHN acquired its
game portal. It also acts as a holding
development of a society in which every
its IT infrastructure management division, in
management control by buying a 51% stake.
company for eight subsidiaries that have
culture can grow and communicate. This is
including data collection, storage and
May 2009 to establish NBP. This was done to
Its aim was to source top-quality sports
been established or acquired to facilitate
done by supporting books that can become
processing technologies, and hardware and
enhance its management efficiency and
games stably.
NHN’s Japanese search and game
the source of children’s dreams, creating
100.0%
-
Webzen
28.5%
-
Flux
-
55.4%
software optimizations for performance
acquire a competitive edge in the online ad
http://www.wisecat.co.kr
businesses.
opportunities for youth who have the
9Webzen Ltd.
-
70.0%
improvement. It is also focusing on the
platform market. It will continue to deliver
Date of Establishment: October 2001
http://www.nhncorp.jp
potential to become leaders of new cultures,
Webzen Taiwan Inc.
-
100.0%
Webzen China Co., Ltd.
-
100.0%
development of new technologies to provide
high values to advertisers and consumers by
Major Businesses:
Date of Establishment: September 2000
and providing a venue that enables people to
Webzen America Inc.
-
100.0%
services that will satisfy users and increase
developing value-added business platforms
Online game development
Major Business:
engage in a variety of cultural activities.
Webzen Europe Inc.
-
100.0%
the reliability of search results. It merged with
and online marketing products, and by
Major Games: Slugger
Operation of Hangame Japan
http://www.nhnfoundation.org
100.0%
-
-
100.0%
1noon, another specialist in search
providing consulting services based on its
Gplus
-
100.0%
technology, in 2006. Search Solution has
expertise in IT infrastructure optimization and
inComms
-
100.0%
developed a number of search engines and
management, ad platform development and
100.0%
-
-
100.0%
related technologies, including "Nexsearch,"
operation, and online marketing.
"SigmaSearch," "TeraSearch," a multilingual
http://www.nbp-corp.com
NHN Investment
include Matome, Unified Search, Image
-
100.0%
keyword indexing product supporting
Date of Establishment: May 2009
NHN Investment, established as a new
Search, and the "Pick" SNS service.
Happybean Foundation
-
100.0%
-
100.0%
Korean, Chinese, and Japanese, and a web
Major Businesses:
technology investment company in April
http://corp.naver.jp
The Happybean Foundation contributes to
NHN I&S
Greenweb Service
NHN Japan Corp.
NAVER Japan Corp.
Next Human Search
Technology Corporation
NHST Japan Corporation
Mediator
/ INVESTMENT
Naver Japan
Major Projects:
Naver Japan operates its namesake (naver.
Mobile Libraries, School Libraries, On Stage,
jp), a Japanese search portal. Its services
Dialogue in the Dark, Book Refunds
-
100.0%
robot.
Online ad sales, marketing platform
2010, boasts the industry’s highest-caliber
Date of Establishment: November 2007
helping an online donation culture take root
Jlisting Co., Ltd.
-
100.0%
http://www.searchsolutions.co.kr
development and operations,
human resources. It invests in promising and
Major Business: Operation of Naver Japan
in our society by linking non-profit
Livedoor Career Co., Ltd.
-
100.0%
100.0%
-
Date of Establishment: February 2000
IT infrastructure outsourcing service
competitive small and medium-sized
-
90.2%
NHN USA Inc.
100.0%
-
NHN China Corp.
100.0%
-
N-Visions
100.0%
-
NHN Business Platform
Livedoor Co., Ltd.
NHN Global Ltd.
NHN-PCCS HK Ltd.
100.0%
-
ITOPF
-
100.0%
-
100.0%
NHN Investments
100.0%
-
Game Marketing & Business
100.0%
51.0%
-
59.2%
NHN Search Marketing
Wise Cat
Studio Hon
Major Businesses: livedoor
communities, including Happylog. It opened
growth potential, and helps them grow into
NHN Japan acquired a stake in livedoor,
Happybean, an online donation portal, in
world-class players.
which operates a comprehensive portal
2005. It plans to continue working to spread
http://www.nhninv.com
(livedoor.com) and blog services, in April
an online donation culture and facilitate
Webzen
Date of Establishment: April 2010
2010. livedoor is engaged in the media
smoother communications within these
Search software development and supply
/ ONLINE GAMES
/ MANAGEMENT SUPPORT
Webzen is an online game developer that
Major Businesses:
business (with "livedoor News"), web services
communities.
-
NHN Information & Service (NHN I&S)
created Korea’s first 3D online game, "Mu
Investments, loans, management and
(with "livedoor Blog"), and advertising. It also
-
NHN I&S specializes in the provision of
Online." It is currently providing a broad
technical guidance for new technology
provides a one-stop service to fulfill
Major Businesses:
integrated management support services,
range of games, including "R2," "Archlord,"
businesses and ventures
customers’ infrastructure outsourcing needs.
Operation of Happybean, an online donation
including internal information systems,
and "C9" following its merger with NHN
http://corp.livedoor.com
portal, volunteer work supports for non-profit
training, personnel, and finance. Following its
Games in July 2010.
organizations
merger with NHN Service in May 2010, the
http://www.webzen.co.kr
company has also been engaged in the
operation of the Naver and Hangame
Date of Listing: May 2003 (On KOSDAQ)
N-Visions
websites, IDC, and infrastructure. Its aim is to
Major Businesses:
N-Visions was initially established as NHN
provide high-quality management support
Online and mobile game development
Social Enterprise in February 2009, with the
NHN USA
and Internet operations services to NHN and
and supply
dual aims of engaging in the concert and
NHN USA operates ijji.com, launched in 2006
its affiliates by leveraging its highly-skilled
Major Games:
exhibition business and hiring the disabled. It
to provide online game services in North and
human resources and wide-ranging operating
Mu Online, SUN Online, Huxley,
was renamed after acquiring a social business
South America and Europe.
expertise.
Battery Online, C9, Arch Lord
certification in August 2010. Its mission
http://www.nhnusainc.com
http://www.nhnins.com
includes a pledge to present new visions to
Date of Establishment: July 2005
Date of Establishment: March 2009
the visually challenged who account for 80%
Major Business:
Major Businesses:
of its employees, and promote public values.
Operation of the online game portal
Management information system
It is currently sponsoring "Dialogue in the
"ijji.com"
development and operations, education and
Dark," an exhibition and workshop, in
consulting, management support, general
collaboration with NHN Cultural Foundation.
administration, translations
Date of Establishment: February 2009
/ SOCIAL BUSINESS
Affiliates
Major Businesses:
Operation of Japanese search portal
Major Businesses: Concerts, exhibitions
100 / organizations with donors in donation
enterprises and venture companies with high
101 /
and blog site
/
Corporate History
1999Jun. Incorporated Navercom
Launched "Naver" search portal
1999Jun.Launched "Jr. Naver" children’s portal
1999Dec.Launched "Hangame" online game
portal
2000Jul. M
erged with Hangame
Communications, One-Cue, Search
Solution
2000Sep.Established Hangame Japan
2001Sep.Company name changed to Next
Human Network (NHN)
2002Oct.Listed on KOSDAQ (Korean Securities
Dealers Automated Quotations)
2003Oct.Merged Japanese subsidiaries into
"NHN Japan"
2003Dec.Acquired "Future Valley," a digital
content transmission technology
company
2004Apr. Ranked No.1 on KOSDAQ in terms of
market capitalization
2004Jun.Signed service alliance agreement with
Sea Rainbow Holdings of China
2004Nov.Established "NHN Games" game
development studio
/
Awards and Accolades
2005Jul.Launched “Happybean” online
donations portal
2005Jul. Established NHN USA
2005Aug.Established "NHN Services,"
an Internet services management
company
2006Jun. Acquired "1noon" search engine
2006Oct.Acquired "Datachorus," a data storage
management solutions company
2007MayNHN USA launched "ijji.com," an online
game portal
2007Nov.Established Naver Japan
2007Dec.Established NHST (Next Human Search
Technology) in Japan
2010Jan.Signed "Agreement to Promote a
Female-Friendly Corporate Culture"
with Ministry of Gender Equality and
Families
2010Apr.Established NHN Investment to
specialize in asset management and
venture investment businesses
2010Jul.NHN Japan acquired "livedoor (livedoor.
com)"
2010Jul.Merged "Wingbus"
2010Jul.N-Visions acquired Social Enterprise
certificate from Ministry of Labor
2010Oct.Acquired "Wise Cat," a sports game
development studio
2008Nov.Transferred to KOSPI (Korea Composite
Stock Price Index)
2009Jan.Acquired "me2day," a micro blogging
service
2009Feb.Acquired "Wingbus," a tour guide
website
2009May Established NHN Business Platform
(NBP) through spin-off
2009Jul. Acquired "ITOF," a mobile marketing
solutions provider
2009 Aug.Changed corporate identity logo to
mark 10th anniversary
2000Feb.Awarded Grand Prize for Excellence in
Digital Information Technology category
from Hankyoreh Daily
2000May Named Korea's top search portal
by Korea Management Association
Corporation (KMAC)
2000Dec.Awarded Grand Prize for Top Internet
Search Portal by Chosun Ilbo
2001Jun.Won Internet Grand Prix of
Entertainment Award from New Industry
Management Academy (NIMA)
2002MayRanked first by KMAC for Best Web
Awards, Game Division, for third straight
year
2002Oct.Named excellent website for privacy
protection by Korea Association of
Information and Telecommunications
2002Dec.Named Internet Company of the Year by
Korea Internet Corporations’ Association
and Journalists’ Association of Korea
2002Dec.Acquired Exemplary Company
certification for legitimate use of
software products from Korea Software
Property Rights Council
2003Jul. A
warded Grand Prize at 2003 Korean
Technology Fast 50 Growth Company
ceremony by Deloitte Consulting
2003Aug.Ranked first in Internet portal category
in Korea Service Quality Index (KSSQI), conducted by Korean Standards
Association
2003Dec.Named 2003 Hit Product for Naver's
"Knowledge Search" by Joongang
Ilbo and Samsung Economic Research
Institute
2003Dec.Awarded Presidential Citation for
contributions to the advancement of the
Korean software industry
2004Aug.Ranked first in KS-SQI in Internet search
portal category for second consecutive
year by Korean Standards Association
2004Dec.Awarded Grand Prize at Web Awards
Korea 2004 by Web Awards Committee
2005Mar.Awarded Excellence Prize at I-People
Awards by joins.com
2005Jun.Named Internet Company of the Year by
NIMA
2005Jun. Named "Korean Brand Star" in portal
site category by Brandstock
2005Sep.Ranked first in KS-SQI in Internet portal
category for third consecutive year by
Korean Standards Association
102 / Corporate History & Awards
103 /
2005Oct.Won "Korea's Most Admired CEO"
award in HR management category,
by Korea Economy and Seoul National
University Academics and Industry
Cooperation Foundation
2005Nov.Awarded Grand Prize at Korean IR
Awards by Korea IR Association
2005Dec.Awarded Grand Prize at IMI
Management Awards in social
contributions category by International
Management Institution (IMI)
2005Dec.Named Internet Company of the Year in
portal category by Kinternet
2006Jun.Won Grand Prize at KOSDAQListed Company awards ceremony
by KOSDAQ- Listed Companies’
Association
2006Jun.Acquired Good Design mark from Korea
Institute of Design Promotion for Naver
(a first for the industry)
2006Sep.Ranked first in KS-SQI in Internet portal
category for fourth consecutive year by
Korean Standards Association
2006Oct.Ranked first in National Brand
Competitive Index (NBCI) survey for
Hangame, in game portal category,
for second straight year by Korea
Productivity Center
2007Apr.Received Presidential Citation at 2007
Awards for excellence in gender equality
employment from Ministry of Labor
2007Nov.Received Presidential Prize at Korea
Internet Awards from Ministry of
Information and Communications
2007Nov.Awarded Grand Prize at Korean IR
Awards by Korea IR Association
2007Dec.Listed in Deloitte Technology Fast 500
Asia Pacific for fifth consecutive year by
Deloitte Consulting
2007Dec.Won Innovation Award at Web
Awards Korea 2007 from Web Awards
Committee
2007Dec.Named Excellent Website for Protection
of Children
2008Feb.Included in 60 CMT Shareholders’
Performance Index by Oliver Wyman
2008Feb.Included in Korea's Most Admired
Companies 2008, All-Star 3 by KMAC
2008Mar.Ranked first in National Customers’
Satisfaction Index (NCSI) survey
in search portal category for third
consecutive year by Korea Productivity
Center
2008Apr. Included in Global 2000 by
Forbes Magazine
2008Sep.Included in Asia 50 by Businessweek
2008Sep.Won Prime Minister’s Award in design
management category at 2008 Korea
Design Awards from Ministry of
Knowledge Economy and Korea Institute
of Design Promotion
2008Dec.Ranked fifth in 2008 Most Profitable
Companies by Industry by Newsweek
2009Apr. Naver ranked first (for fourth consecutive
year) among search portals in NCSI in
search portal category
2009Apr.Hangame ranked second in web-board
game category by Korea Productivity
Center
2009Jun. Won Best Venture Business with Highest
Sales in 2009 Award from Korea Venture
Business Association
2009Sep.Included in Asia 50 by Forbes Magazine
2009Oct.Naver ranked first in 2009 KS-SQI survey
for sixth consecutive year by Korean
Standards Association
2009Nov.Naver ranked first in 2009 Korean
Customer Satisfaction Index survey for
seventh consecutive year by KMAC
2009Nov.Naver ranked Number 5 among worldwide search portals by comScore
2009Dec.Naver awarded Grand Prize in mobile
web, media, and information services
category by Web Awards Korea
2009Dec.C9 won Grand Prize at 2009 Game
Awards Korea from Ministry of Culture,
Sports and Tourism
2009Dec.Included in 50 Promising Asia-Pacific
Companies 2009 by Forbes Magazine
2009Dec.Ranked third in 2009 Top 100 Brands of
Korea survey by Brandstock
2009Dec.Won 2009 Korea Sharing and Volunteer
Awards prize from Hankook Daily News
2009Dec.Won Minister of Culture, Sports and
Tourism award for contributions in library
donations category
2010Jun. Naver Hangeul campaign, "Beauty
in every letter" won PR Silver Lions
award at Cannes Lions International
Advertising Festival
2010 Aug.Won five awards for Brand Design from
red dot Awards
2010Aug.Won nine design awards for Naver
Greenwindow, "Dialogue in the
Dark" intro clip, and others at iF
Communications Awards
2010Aug.NHN’s annual report won Gold Prize
in Internet services and publication/
production categories, and Bronze Prize
in design category, at Annual Report
Competition 2010 Awards
/Sustainability
NHN is committed to the development of a happier
and healthier world. It does this by carrying out
a wide variety of social contribution activities, both
online and offline. This includes creating an online
donation culture and supporting cultural programs.
Social Contribution
Environmental Management
Ethical Management
We are also committed to the preservation and protection
of the earth and the environment. As proof of our dedication
to this cause, all of our employees have started using ecofriendly coffee cups. In addition, the company has built a lowcarbon-emissions Internet data center (IDC) and is distributing
an environmental protection game called "Eco Friends"
to children around the world. Everyone at NHN (including
the CEO) takes the meaning of our motto, "Honesty and
Faithfulness," to heart, both at work and at home. They are
dedicated to ensuring that we leave future generations
a planet that is beautiful, healthy, and livable. Moving forward,
we will continue to work for the healthy and sustainable
development of the earth and the environment. Above all, we
want to be known as a company that is trusted and respected,
growing, helping, and sharing with all its stakeholders.
104 / Sustainability
105 /
/
Social
Contributions
NHN’s caring and sharing activities include mobile libraries, volunteer services,
support for various cultural programs, the construction of neighborhood libraries, and
the operation of an online donation portal called Happybean. Going forward,
we will continue carrying out social contribution activities to help build a more beautiful,
happier, and healthier world.
Encouraging caring and sharing
NHN operates the Happybean Foundation and an online donation portal called Happybean to further the development of an
online donation culture. From 2005 to 2010, more than 6 million netizens and about 300 "Happy Brands" corporate sponsors
donated a total of KRW 23 billion through Happybean.
In 2010, we launched a campaign to help the victims of the earthquake in Haiti. We also raised KRW 216 million for the "Nets
Go Campaign by UN Foundation" to help purchase mosquito nets for African children suffering from malaria.
Working and dreaming together
NHN and NHN Cultural Foundation support a variety of programs to ensure that books will always be available to transmit
and spread knowledge. For example, we have been working with the Micro-Library Corporation since 2005. So far, we have
helped build 194 libraries in remote regions of Korea. Some of our other efforts include mobile libraries and the "book refund
campaign." Through a program called "On Stage," we seek out unknown musicians and help them enhance their abilities. We
are also working to reducing prejudice against people who are "different" by supporting a world-wide exhibition and
workshop called "Dialogue in the Dark." By attending it, over 6 million people have discovered what living in darkness is
really like.
Delivering helping hands in our communities and around the world
NHN provides job opportunities for the socially marginalized to improve the quality of their lives and instill pride in them,
primarily through the "Silver IT Business" program and "N-Visions," a workplace for the disabled. We also carry out public
service campaigns, such as "Naver Green," which encourages proper Internet activities, and "Beauty in Every Letter," which
aids in the correct use of the Korean alphabet. We also opened a public space called "Library 1" in our new "Green Factory"
office building as part of our program to contribute to community development.
We also deliver sharing hands overseas. For example, we have helped to establish nine NHN Hope Schools in rural areas of
China through the "NHN Hope School" project since 2005.
Developing a healthy and open Internet world
NHN launched a "Naver Eco Square" service, offering its Internet servers and lines to developers and individuals at no charge
as part of its effort to improve the competitiveness of Korea’s Internet ecosystems. Taking the "NHN DeView" developers’
conference as a starting point, we have begun treating our major technologies as open sources. We are also offering free
/
Sharing
happiness and hope
academic APIs to college libraries, along with 24 open ones. In addition, we host a "Next Generation of Academics Support
Program" in collaboration with The Korean Society for Journalism & Communications Studies. We also offer scholarships to
support the integration of science and Internet technologies.
Donation Programs and Volunteer Service Activities
Employees of NHN and its affiliates have been operating a "2,000 Won Club" since 2000. They donate a minimum of KRW
2,000 every month, with the company matching the total. In addition, the proceeds from the operation of our in-house
cafeteria and the sale of our branded products are donated through Happybean. Donations made in 2010 supported the
"Happy Propose Campaign" and Global Vision’s "Dream Bicycle Delivery" program in Vietnam. Led by an in-house volunteer
group called "N'Gels," our employees participate in a wide range of volunteer service activities.
107 /
/
Environmental
Management
NHN’s programs to support and protect the environment range from using
eco-friendly coffee cups, curtailing the use of disposables, and building Green IT
infrastructures to reduce carbon emissions and increase energy efficiency to
developing educational games that stress the need to protect the environment.
Developing a "Green IDC" by building environmentally friendly IT infrastructures
NHN is developing a "Green IT Infrastructure" and environmentally friendly IT technologies to reduce energy use at its
Internet data center (IDC). To this end, we have carried out a series of projects to raise the efficiency levels of our electrical
and cooling systems. This has resulted in the creation of a "Green IDC" that uses 30% less electricity than the old one did, at
a cost saving of about KRW 430 million a month. Some of the steps that we carried out to reach this goal include using
low-electricity servers, deploying outdoor heat exchangers, installing a return duct system, and managing the heat levels of
our equipment by using server virtualization technology and special racks. We also increased the stability of our service
operations by constructing an environmental management system (EMS). This allows us to monitor the temperature and
electricity usage levels of all our servers in real time.
Promoting environmental awareness by developing "eco-characters"
NHN developed two characters, "Harty" and "Waddy," that are modeled after ringed seals and Irrawaddy dolphins, both of
which are endangered species. We donated these characters and the slogan "Save the Earth, Save Yourselves" to the UNEP
to underline the message that preserving the environment is vitally necessary if we are to protect the earth and everything
that lives on it. They will be used in a wide range of international environmental campaigns.
Using educational games to study the environment of the future
NHN has been developing an environmental education game called "Eco-Friends" since 2009, in collaboration with the Korea
Creative Content Agency and UNEP Korea. Sponsored by the Ministry of Culture, Sports and Tourism, it helps players to
understand the danger of climate change and the need for environmental protection. The storyline involves creating an
eco-friendly village by reducing greenhouse gas emissions.
We first introduced the game at the United Nations Framework Convention on Climate Change (UNFCCC) in December
2009. We also operated an "Eco-Friends" PR center at the 11th annual UNEP Special Session of the Governing Council
Forum/Environment Ministers’ Meeting in Indonesia in February 2010. In December 2010, we held an "Eco-Friends"
launching event at the UNFCCC COP 16 in Mexico, where we distributed the game at no cost in both Korean and English. It
is expected that it will serve as an environmental education material for about 180 million children in more than 190 countries.
Protecting the environment by using eco-friendly coffee cups
On June 5, 2010, NHN celebrated Environment Day by conducting a "using eco-friendly coffee cups, an environmentally
friendly habit for the earth and me" campaign. The cups come in five models, containing photographs of five endangered
/
animals—the polar bear, the hoatzin, the Formosan deer, the pitta, and the dolphin—from five continents. All of our
Sustainability
109 /
Protecting the environment to
ensure a greener future
108 / employees are using the cups to help preserve the environment. In addition, our NHN Store sells "Connect-Eco Series"
products, including containers made from sugar cane scraps, postcards made from cellulose, and pencils made from
recycled plastic.
/
Ethical
Management
NHN ensures that its employees follow its ethical guidelines both in their working and
private lives by insisting that they adhere to its Code of Ethics. By committing itself to
the practice of principled and transparent management, it will continue being a company
that is respected and trusted by all its stakeholders.
Fulfilling social responsibilities
NHN’s employees are committed to ensuring that the company faithfully adheres to fair trade practices. This is done by
ensuring that the company’s core values are followed faithfully. They include modesty, a sense of ownership, creativity and
innovation, and challenge and passion. NHN’s business practices focus on enhancing the values and retaining the trust of its
various stakeholders, and embodying the management principles enunciated in its core values and its corporate vision.
Ethical management system
NHN’s ethical management guidelines outline the values and behaviors that its employees must adhere to in fulfilling their
roles and responsibilities as part of a world-class Internet company.
In addition to operating an ethics counseling center, the company has devised a series of guidelines governing such matters
as its business activities, fair trade practices, and the purchasing of company shares by its workers. It also carries out a variety
of educational programs to help make its employees more aware of the importance of acting ethically and responsibly.
Fair Trade Compliance Program
NHN introduced its "Fair Trade Compliance Program" in December 2007 to promote the practice of ethical and transparent
management. It is designed to ensure fairness and honesty in dealing with the company’s business partners, and stresses
the need to revamp its business practices when they fail to keep up with its rapid growth.
Some of the steps that the company has taken to encourage fair trade practices include appointing a Compliance Officer,
providing its employees with educational and training programs and printed materials on fair trade, and opening a counseling
center and a hot-line to which all employees and outsiders have easy access.
Modesty and
Responsibility
Challenge
and Passion
Modesty and
NHN’s employees must be modest, and never forget that they are
Responsibility
the front-line faces of the company.
Creativity and
NHN’s employees must never be satisfied with the status quo. Instead,
Innovation
they must have a friendly and helpful attitude, and always be ready to
provide customers with high-quality services.
/
Principled and
transparent management
Creativity
and
Innovation
NHN’s
Core Values
Avoid Behaviors that
Impact Negatively on
the Company
Healthy
Corporate
Culture
Challenge
NHN’s employees should adhere to the belief that "people who are
and Passion
not up to the challenge gain nothing," and always be willing to seek
new challenges.
Avoid Behaviors
NHN’s employees must know where to draw the line between public
that Impact
and private matters when they are at work, and not do anything
Negatively on the
outside the workplace that would be damaging to the company.
Company
Healthy Corporate
NHN’s employees must strive to create a workplace that places
Culture
a premium on honest communications and mutual trust, and in which
respect and the rights of other people are valued. In addition, their
actions and words must not hurt or offend their fellow workers, or
discriminate against them in any way.
111 /
/
INVESTOR INFORMATION
NAME OF COMPANY:
Stock Information
Disclaimer
NHN Corporation (KOSPI 035420)
(as of December 31, 2010)
This report does not contain a complete
CEO: Sang-Hun Kim
No. of common shares issued: 48,127,704
description of NHN’s business performance.
DATE OF ESTABLISHMENT: June 2, 1999
Market capitalization: KRW 10.9 trillion
Investments involve risk, and the
CAPITAL: KRW 24,063,852,000
HEAD OFFICE: N
HN Green Factory, 178-1
performances described herein do not
Independent Auditor
guarantee future results. Please note that
Jeongja-dong, Bundang-gu,
[KPMG Korea]
NHN Corporation and the officers and
Seongnam, Gyeonggi-do,
Address: 10th floor, Gangnam Finance
employees of it and its affiliates shall not be
Korea 463-867
HOMEPAGE: www.nhncorp.com
Center, 737 Yeoksam-dong,
liable for losses or damage arising from
Gangnam-gu, Seoul, Korea 135-984
investments or business decisions made by
Homepage: www.kr.kpmg.com
a third party based on the information
Main Services
Tel: 82-2-2112-0001
contained herein.
Naver Internet Search Portal
Fax: 82-2-2112-0002
(www.naver.com)
IR Information
Hangame Online Game Portal
The 2010 Annual Report and recent
(www.hangame.com)
investment information on NHN Corporation
Junior Naver Portal for Children
can be found, in both Korean and English, on
(jr.naver.com)
NHN’s home page, www.nhncorp.com.
Happybean Online Donation Portal
(happybean.naver.com)
Contacts
If you have any questions regarding NHN
Number of Employees
investments or IR, please feel free to contact
(as of December 31, 2010)
the following.
NHN: 2,501
[NHN IR]
NHN Business Platform: 787
Tel: 82-1588-3830
Fax: 82-31-784-1000
E-mail: ir@nhn.com
112 / Investor Information

Get Wider, Be Closer NHN Annual Report 2010

Transcription

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