LG Electronics Inc., the world's fourth-largest maker of mobile phones, posted a 70 percent decrease in second-quarter profit as competition from Nokia Oyj and Motorola Inc. drove LG into what it characterized as loss from its handset business.
Second-quarter net income fell to 151 billion won (approx. U.S. $146.1 million) from 493 billion won (approx. $477 million) a year earlier, Seoul, South Korea-based LG said in a regulatory filing. Operating profit fell 63 percent to a lower-than-expected 144 billion won (approx. $139.3 million) and revenue dropped 7 percent to 5.6 trillion won (approx. $5.4 billion). After posting its first loss from mobile phones, LG cut its 2005 handset shipment target by more than 10 percent.
The company reduced its forecast for 2005 handset sales to between 53 million to 55 million units, compared with an earlier projection for 62 million. Sales this quarter will probably be about 14 million units, LG said.
Operating loss from mobile phones, the first since the company was reorganized in 2002, was 4 billion won (approx. $3.9 million), compared with a profit of 123 billion won (approx. $119 million) a year earlier. Including network equipment, the telecommunications division's second-quarter operating profit plunged 94 percent to 8.4 billion won (approx. $8.1 million), LG said in a press release. Mobile phones were projected to contribute 62 billion won (approx. $60 million) in operating profit, according to the Bloomberg survey of analysts.
Mobile-phone sales fell 5.2 percent to 1.8 trillion won (approx. $1.7 billion), or 12.1 million units, the company said. Short of the 20 percent shipment growth projected from the first quarter, the company missed its mobile-phone shipment target for a second consecutive quarter.
The company's display business, including sales of plasma display panels, posted a 22 billion won (approx. $21.3 million) loss and sales fell 2.3 percent to 1.2 trillion won (approx. $1.2 billion). The division was projected to earn 14 billion won (approx. $13.5 million) in operating profit and sales of 1.2 trillion won (approx. $1.2 billion), the Bloomberg survey said. LG Electronics forecast display prices to continue to fall in the current quarter, though it forecast its plasma business may break even.
LG Electronics may restructure one or two European plants at LG.Philips Displays, the unit that makes glass tubes for televisions and monitors, said Na Young Bae, head of investor relations at LG Electronics. LG.Philips Displays posted its third straight quarterly loss. The second-quarter net loss at the Hong Kong-based venture between LG Electronics and Royal Philips Electronics NV of the Netherlands was $26.5 million, compared with a profit of $11.4 million a year earlier. (Bloomberg)
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