LG Electronics profits fall on phone woes

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LG Electronics profits fall on phone woes

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LG Electronics, the consumer products giant, said yesterday that net profits fell by 99 percent to 7.57 billion won ($6.7 million) in the third quarter, while it had a record operating loss because of weaknesses in its mobile phone business. Sales fell 2.1 percent to 13.43 trillion won.

The mobile phone division has been struggling because of LG’s late entry into the smartphone sector, while earnings from its television business have been hit by increased competition.

LG is the world’s No. 2 manufacturer of televisions and the No. 3 producer of mobile phones.

The company reported an operating loss of 185 billion won against a profit of 851 billion won a year ago.

Operating losses in the mobile phone business increased to a record 304 billion won, and margins fell to a negative 10.2 percent as LG increased spending on development and marketing costs to prop up its troubled mobile phone segment.

LG hopes that its new smartphone model, Optimus One, will reverse the downward trend in the coming months.

Analysts warn that LG could post a third consecutive operating loss in the fourth quarter.

The mobile phone business has lost money for two straight quarters.

“Amid falling prices of mobile phones and increased investments to boost competitiveness in the smartphone business, profitability declined,” the company said.

After the disappointing results of the second quarter, LG had pulled the plug on Nam Yong, the chief executive, who resigned on Sept. 17 to assume responsibility for the company’s poor performance. He was succeeded by Koo Bon-joon, who is the younger brother of Koo Bon-moo, the LG Group chairman, in effort to turn the company around. He recently appointed new heads for the television and mobile phone divisions. Analysts said that LG has been slow in responding to growing global demand for smartphones.

Profit margins for televisions were squeezed by increased competition from Sony and Samsung Electronics, although TV shipments rose 37 percent from a year ago.


By Jung Seung-hyun [seungjung@joongang.co.kr]
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