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LG has best handset quarter for two years

Smartphones drive it to Q4 operating profit as it focuses on higher margin devices and LTE products

By CAROLINE GABRIEL

Published: 31 January, 2013

READ MORE: Financial | LG Electronics | Handset

LG said its handset unit staged a strong comeback in the fourth quarter, with a 25% increase in operating profit - though it still made a net loss because of a price fixing fine. The company said increased sales and better cost structure boosted mobile performance, despite higher marketing and R&D expenses.

The handset unit reported Q412 operating profit of KRW55bn ($50.66m), compared with a year-ago loss of KRW3bn, on revenue of KRW2.78 trillion, up 3.1% year-on-year. For the full year, the division saw an operating profit of KRW51bn, compared with a loss of KRW280bn a year earlier, on revenue down 13.1% to KRW9.9 trillion.


The full year profit was largely down to a strong Q4, with key LG smartphones performing well in the holiday season. Across 2012 as a whole, it had two quarters in operating profit and two in loss, better than 2011, which was entirely lossmaking.

In the quarter, handset shipments increased by 7% compared to Q312, to 15.4m units, with 56% of those being smartphones, compared to 50% in the previous quarter. The Optimus G and Vu2 LTE smartphones were particularly singled out for credit, along with "robust" sales of the L-series 3G devices, and the launch of the Nexus 4, co-branded with Google - although that has suffered from supply constraints.

Looking ahead, it hopes to ride the growing LTE wave with its high end models, increase its cost efficiencies and launch successors to the Optimus G and L-Series devices. It is also planning "mass LTE smartphones" in the F-series line.

On a group level, the company reported a net loss of KRW468bn in the quarter, compared with a Q411 net loss of KRW112bn, on revenue of KRW13.5 trillion, down slightly year-on-year. It said that the loss "reflects a fine related to alleged cathode-ray tube pricing issues imposed by the European Commission in December".

Research firm Gartner estimates LG ranked fifth last year among cellphone vendors, with a 3.4% market share, behind compatriot Samsung in the lead on almost 22%.

"Following restructuring efforts and the launch of the Optimus G smartphone model last year, LG was able to narrow the big gap it had with the leading companies in terms of technology and phone design, performance and convenience," said Yoon Bu-hyun, VP for LG's mobile unit, admitting the division had struggled for three years.

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