After being hit hard by the "bribery scandal" in late 2003, leading multinational computing vendor IBM has been facing weak results and eroding reputation in Korea.

The hardware business unit of the company continued to post minus growth since 2003, and swung to modest growth in the first quarter of this year, but profitability still remains weak. The gap with HP and EMC is growing, as it barely managed to stay in the second place.

The software and the consulting business also perform poorly, marring the company`s reputation as a total IT service provider.

Sales peaked to some 1 trillion won in 2002, and have plunged to 800 billion won. CEO Lee Hui-seong, who was named to lead the company about a year ago, is also under fire for appointments of associates and the lack of leadership.

According to IDC, IBM sold 2,653 units of servers in the fourth quarter of 2004, 3,100 in the second quarter of 2005 and more recently 5,900 in the fourth quarter of 2005. Rising sales volumes have not led to rising won value of sales, however.

The sales figures amount to 100.7 billion won, 80 billion won 100.5 billion won, respectively. While sales volumes doubled, revenues fell instead.

Some industry observers say that the company may push sales volumes up to defend its market share.

IBM Korea is gaining slightly ahead of rival HP in the high-end sector, but lagging behind by more than 20% in the volume and the midrange market.

IBM storage remains a minor brand despite the company`s aggressive strategy. In 2005, it took 11% of the market compared to 33.9% of EMC Korea and 20.1% of HP Korea.

The consulting and the software division also remain short of expectations despite full support from the main office. In 3 years since the merger with PwC, the business division now sees both sales and recognition slide instead of a synergy.

Aggressive marketing campaigns have not boosted the brand to the overall IBM level. Rivals like HP, CA and BMC have lured quite a number of corporate customers with service-oriented architectures, IT service management and ITIL, while IBM Korea providing 300 to 500 million-worth consulting to customers for free.

It has managed to seal an SOA deal with Kookmin Bank, and its database management system "win-back" marketing targeting Oracle Korea only backfired to widen the gap with the rival.

The middleware business, which IBM maintains the first spot in the world market, is not faring well, either. It has stayed in the third place, losing in competition for products and roadmaps.

With revenues falling against rising sales volumes and given the launch of software business, the management also seems to have a problem. CEO Lee is facing a threat to his clout, after kicking out manager with know-how and IBM vision during the course of reshuffling.