Serome Technology, Naver.com Merger Fails

Serome
Technology Inc.
, creator of the free Internet phone service Dialpad, said this week that it cancelled its proposed merger with Naver.com, one of Korea’s largest search engines, due to its faltering stock price.

Last month, the two companies signed a memorandum of understanding
to integrate their operations through a stock swap, in what would have
been the largest merger deal ever for local Internet firms.

Since the announcement of the high-profile merger in March, Serome
Technology lost nearly three-fourths its value from its peak. This was partially due to the ongoing slump in the KOSDAQ market but investors were also growing increasingly concerned over the lack of synergy in the merger.

Now, the company is considering acquiring a 10 percent stake in
Naver.com. for 25 billion won (US$22.5 million). The company also hinted that it was seeking a foreign investor, saying that a deal may be
disclosed as early as next week.

Investors have been increasingly doubtful over the viability of
Serome’s business model, for which profitability remains a distant prospect. The company offers a free Web-to-phone service, ‘Dialpad’, which depends entirely on ad revenues to generate profits. It has almost 5.5 million registered users in the U.S. and Korea

Serome said it would maintain a cooperative relationship with Naver.com in
the future, while continuing to push for the globalization of web-based telephony services.

Industry analysts said that Serome Technology’s failure to merge with
Naver.com might deal a blow to Korea’s Internet-based ventures, particularly those planning to undergo mergers and acquisitions.

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