Bloomberg News

LG Posts Wider-Than-Estimated Loss on Phones, Flat-Panel Unit

November 01, 2011

Oct. 26 (Bloomberg) -- LG Electronics Inc., the world’s third-largest maker of mobile phones, reported a wider-than- estimated quarterly loss as mobile-phone sales missed forecasts and earnings dropped at its flat-panel unit.

LG had a net loss of 414 billion won ($367 million) in the three months ended September, it said in a statement today, wider than the 56.1 billion won loss average of eight analysts’ estimates compiled by Bloomberg in the past four weeks. The Seoul-based phone maker had a profit of 7.6 billion won in the third quarter last year.

A record loss at LG Display Co. added to lower sales at the mobile-phone business, which has lost more than 700 billion won in the past year. Chief Executive Officer Koo Bon Joon is introducing 3-D televisions and new models of Optimus smartphones powered by Google Inc.’s Android software to better compete with larger rival Samsung Electronics Co.

“It’s been almost a year since their mass-market model Optimus One came out, and its life cycle is about to close without a follow-up model,” Park Seong Min, a Seoul-based analyst at Kyobo Securities Co., said by telephone. “That probably led to a fall in smartphone shipments.”

LG rose 2.2 percent to close at 77,500 won on the Korea Exchange while the benchmark Kospi index gained 0.3 percent. The stock has tumbled 34 percent this year, compared with a 7.6 percent decline in the index.

The company had an operating loss of 32 billion won, narrower than a loss of 185.2 billion won a year ago, while sales fell 4 percent to 12.9 trillion won.

Handset Loss

The mobile-phone division had a loss of 138.8 billion won with a 139.9 billion won loss from handset sales. While that narrowed from a 302.9 billion won loss a year ago, it’s wider than an estimated loss of 90.5 billion won, based on the median of four analysts’ estimates compiled by Bloomberg News. Sales at the division fell 8.5 percent to 2.8 trillion won.

LG will probably continue to have losses from the handset business through the first half of next year as competition intensifies, Charles Park, a Hong Kong-based analyst at Mizuho Securities Asia, said in an Oct. 11 report.

The company will probably ship about 23.8 million smartphones this year, compared with 6.2 million in 2010, while its share in the overall handset market is forecast to fall to 6.5 percent from 8.6 percent, according to industry researcher Strategy Analytics.

LG, which lowered its smartphone sales target by 20 percent to 24 million units for this year, will focus on increasing sales of fourth-generation smartphones using the so-called long- term evolution technology, the company said today.

Home Entertainment

That may not be enough to turn around the handset business because fourth-generation mobile services have yet to gain widespread acceptance, said Kim Jong Wan, a Seoul-based analyst at Samsung Securities Co.

The home-entertainment division, which makes TVs, had an operating profit of 101.1 billion won, rising from 86.1 billion won a year earlier. The median of the four analyst estimates was for a profit of 85.5 billion won. Sales declined 7 percent to 5.4 trillion won.

To counter slowing growth in worldwide TV sales, LG is seeking to increase sales of 3-D TVs using a technology called Film Patterned Retarder, or FPR, an alternative to the shuttered-glasses approach used by its rivals including Samsung.

Global shipments of LCD TVs will rise to 206 million units this year, falling short of an earlier projection of 211 million units, research company DisplaySearch said on Oct. 11.

Digital Broadcasting

A switch to digital broadcasting, set to take place in Europe and Asia over the next year, may also help revive demand for new LCD TVs, Jeff Kang, a Seoul-based analyst at Daishin Securities Co., wrote in an Oct. 4 report.

LG Display, 38 percent owned by LG Electronics, last week reported a record 687.5 billion won loss in the quarter ended in September after panel prices dropped and the won weakened.

The home-appliance division had an operating profit of 70.1 billion won, a 10.7 percent increase from a year earlier, on 2.7 trillion won in sales. That compares with the 40 billion won median of the four analyst estimates.

The air-conditioner business had a profit of 1.4 billion won, rising from a 46.7 billion won loss a year ago, LG said. The median of the four analyst estimates was for a loss of 17 billion won.

--Editors: Frank Longid, Terje Langeland

To contact the reporter on this story: Jun Yang in Seoul at jyang180@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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