LG to report fifth loss in a row for handset unit
While smartphones will be the bright spot in Samsung's mixed quarter, LG is still failing to make a big impact in the sector
Published: 7 July, 2011
READ MORE: Financial | South Korea | LG Electronics | Handset
Smartphones will rescue Samsung's second quarter results from disaster, but its compatriot LG is still struggling to make its mark on the sector, and is expected to report a fifth consecutive quarterly loss in its handset division.
Reuters reports that the smaller vendor has has cut its 2011 smartphone shipments target from 30m to 24m, and it also reduced its overall cellphone forecast from 150m to 114m units. "Our overall performance is gradually improving... but it's difficult to give a precise prediction when our business will turn around due to a fast changing external market environment," said Park Jong-seok, head of the handset group.
Analysts expect second quarter losses at this division to narrow, but still to between KRW70bn and KRW90bn ($66m to $85m), from KRW120bn ($112bn) in the year-ago quarter. Many of its smartphone problems stem from being overshadowed by Samsung, which entered the space earlier than its rival and with greater impact. LG's Optimus range has remained stuck in the midmarket (though its new 3D model has a higher profile) rather than shining alongside the Samsung Galaxy S and S II.
"In mature markets, the LG brand is still considered a step down from Samsung, which makes their products less appealing," said Gartner analyst Caroline Milanesi.
Meanwhile, Samsung will suffer a 26% drop in Q2 profit because of a slump in flat screens, but smartphones and even tablets will be highlights of its performance, with its market share in the former segment more than doubling year-on-year.
The Korean giant said in a preliminary statement that its Q2 operating profit would fall to KRW3.7 trillion won ($3.5bn), compared with KRW5.01 trillion won a year earlier, and slightly below analyst estimates. With flat panels making a loss for the second quarter in a row, the pressure on the Galaxy mobile line to make up the shortfall has intensified. And Samsung will particularly look for a bounce in the non-iPad tablet market, since this boosts other businesses such as memory chips and the flat panels themselves. "Overall demand for technology products has been very weak," Im Jeong Jae, a fund manager at Shinhan BNP Paribas Asset Management, told Bloomberg. "If demand for tablets and 3D TVs recovers, the panel business can turn around fast."
According to Korean analyst estimates, profit at the semiconductor division will fall by an estimated 33% to KRW1.96 trillion won, on a slight rise in sales, while growth rates for PC chips will slow, partly because of the iPad. The main bright spot for this division will be the rising demand for highly priced processors for mobile devices and for servers.
The telecoms unit - mobile devices plus the small but growing infrastructure business - will see an expected 32% rise in sales to KRW11.62 trillion, and double its profit to KRW1.5 trillion. Samsung is thought to have shipped 19.2m smartphones in the quarter, contributing significantly to its 2011 target of 60m. In Q1 it had shipped 10.8m smartphones, putting it in fourth place in this segment and many analysts think it will grab the number one spot in Q2.
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