Korea: IBM, LG winding down joint venture

Sources say the two companies will likely dissolve their 8-year-old subsidiary sometime this year.

IBM and LG Electronics are moving to dissolve a joint venture for selling PCs in South Korea, sources say.

The CEO of the joint venture, Lee Duk Ju, recently told employees that the two companies will likely divide LG/IBM PC, with each parent company taking the elements it originally brought to the partnership, according to sources. Lee said the dissolution is expected to occur by the end of the year, sources added.

Labor unions, which are quite strong in South Korea, are negotiating with the companies over issues relating to employees.

An IBM representative in the United States did not say the venture would be dissolved but acknowledged that the two companies are re-examining it. "Currently, we are reviewing the partnership, but no agreement has been reached," he said.

LG/IBM PC was formed in 1996, with a 49 percent investment from LG, one of South Korea's largest electronics companies, and a 51 percent investment from IBM. The organization sells such IBM products as ThinkPads, eServers and xServers. LG's contributions to the partnership largely involved creating a sales channel and a supply chain, though the joint venture also sells LG-branded PCs.

LG, IBM Korea and LG/IBM PC all rejected requests for comment on the issue.

In January, some executives from IBM ventures in Korea, including LG/IBM PC, were indicted for rigging public-sector computer contracts. Big Blue subsequently fired all the executives in question and announced a new head for its Korean operations.

Yong-Young Kim of ZDNet Korea reported from Seoul. CNET News.com's Michael Kanellos contributed to this report from San Francisco.