LG Electronics Rises After First Phone Profit in 7 Quarters

LG Electronics 2011 Full-Year Loss Narrows on TVs
Rising sales of higher-margin TVs and smartphones helped the company improve profitability. Photographer: Daniel Acker/Bloomberg

LG Electronics Inc., the world’s third-largest maker of mobile phones, posted the first profit at its handset business in seven quarters, helping shares reverse earlier losses in Seoul trading.

The mobile-phone business had an operating profit of 12 billion won ($10.7 million) in the quarter ended Dec. 31, the Seoul-based company said in a statement today. That compared with the 12.9 billion-won median loss in a Bloomberg News survey of four analysts.

LG has introduced smartphones using Google Inc.’s Android software and sporting what it says are sharper displays and faster processors than the components in Apple Inc.’s iPhone. Profit from selling TVs also exceeded estimates in the quarter, helping narrow the company’s net loss from a year earlier.

“The handset business will continue improving,” Chun Sung Hoon, a Seoul-based analyst at Hana Daetoo Securities Co., said by telephone. “With everyone using the same software platform, the competition comes down to hardware competitiveness, which LG is strong at.”

LG rose 1.9 percent to 84,300 won at the close of trading in Seoul, after falling as much as 2.8 percent earlier in the day. The benchmark Kospi index gained 0.2 percent.

Mobile Turnaround

South Korea’s second-largest electronics company wants to boost sales to 57.6 trillion won this year from 54.3 trillion won last year. It plans to spend 1.6 trillion won in capital expenditure and invest 2.6 trillion won in research and development.

LG turned around its handset business even as sales fell about 18 percent, helped by higher-priced models. The company’s operating margin from selling mobile phones turned positive for the first time since the first quarter in 2010.

LG said it sold 17.7 million mobile phones, including basic types. It didn’t give a breakdown for smartphones.

Smartphone sales may have gained 47 percent to 5.7 million units in the fourth quarter from a year earlier, according to an estimate from Macquarie Group Ltd. That projection is lower than the 54 percent growth in global shipments estimated by research company Strategy Analytics.

Samsung Electronics Co.’s smartphone sales during the quarter more than tripled, and Apple more than doubled iPhone shipments.

TV Profit

LG is counting on devices running on faster networks using long-term evolution, or LTE, technology. The company sold more than 1 million units of the Optimus LTE phone since it debuted in October, LG said last month.

The home-entertainment division, which makes TVs, had an operating profit of 149.7 billion won, rebounding from a 65.2 billion-won loss a year earlier. The median of four analyst estimates in the Bloomberg News survey was for a profit of 136.5 billion won. Sales fell 5 percent to 6.3 trillion won.

Operating margins at the business recovered to 2.4 percent from negative 1 percent a year earlier, helped by high-end models, the company said.

LG is seeking to boost liquid-crystal-display TV sales by about 20 percent to 30 million units this year with models showing 3-D images.

The company wants to become the largest seller of 3-D TVs this year by capturing about 25 percent of the market, with about 80 percent of the new products in South Korea having 3-D features, LG said last month.


LG is using a 3-D technology called Film Patterned Retarder, or FPR, an alternative to the shuttered-glasses approach used by rivals including Samsung. LG says its polarized glasses are lighter, more comfortable and cause less eye strain.

Demand for panels using FPR helped LG Display Co. report a narrower-than-estimated fourth-quarter loss.

“LG’s rather audacious challenge to Samsung in the 3-D TV market has been a success,” Daniel Kim, a Seoul-based analyst at Macquarie Group Ltd., wrote in a Jan. 16 report.

LG also plans to start selling TVs using the organic light-emitting diode, or OLED, technology in the second half of this year. OLED produces sharper images than LCD.

The home-appliance division had an operating profit of 64.6 billion won, a 17 percent drop from a year earlier, on 2.99 trillion won in sales. That compares with the 62.9 billion won median of the four analyst estimates.

Price cuts amid competition with Samsung, in addition to higher raw material costs and weak demand, probably contributed to the lower profit, said Park Seong Min, a Seoul-based analyst at Kyobo Securities Co.

The air-conditioner business reported a 37.9 billion-won loss, compared with a 9.7 billion-won profit a year earlier, LG said.

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