LG absorbs 2nd mobile loss

LG Electronics posted a deficit for its mobile phone business for the second consecutive quarter, despite improved sales.

LG said yesterday it posted 14.9 trillion won ($13.7 billion) in revenue in the fourth quarter, up 7 percent from the previous quarter and 1 percent year-on-year. Its operating profit rose 9 percent from the third quarter to 238.1 billion won. Compared with the fourth quarter in 2012, operating profit saw growth of 101 percent.

But its mobile business posted a 43.4 billion won operating loss, compared to 79.7 billion won in the third quarter. The company stressed it was a positive sign.

“As we were releasing our strategic phone, the G2, in the third quarter, we were focused on marketing and operating loss increased,” said an official of LG Electronics. “But since then, sales have increased and the profit structure is strengthening.”

To raise the profile of its brand, the company boosted promotion of the marquee 5.2-inch G2 handset unveiled at New York’s Lincoln Center in August, as well as its first curved G Flex device introduced on Oct. 29. The 6-inch G Flex is now available in Asia and will be released in the U.S. market through AT&T, Sprint and T-Mobile USA in the first quarter.

Strong TV sales cushioned the company for its mobile business woes. Operating profit in the home-entertainment division, which makes TVs, jumped 40 percent to 174.3 billion won. Its sales also jumped 18 percent.

LG is expecting the mobile phone business to turn around in the second half of this year.

“We are seeing some outcome of our massive marketing efforts for G2,” said LG Electronics President Jung Do-hyun during a media briefing yesterday. “By the time the next model, G3, comes out, I think we could take a turn into profit.”

The company booked a fourth-quarter loss of about 332.4 billion won from currencies, foreign debt and tax, it said without elaborating. Shares of LG fell 1.3 percent to 68,900 won at the close of Seoul trading, while the Kospi index fell 1.6 percent.

The company is targeting sales to rise 7.2 percent to 62.3 trillion won in 2014. The forecast for 2014 is 3.9 percent higher than analyst estimates.

LG slipped two positions to fifth in the global smartphone market in the third quarter with 4.6 percent of shipments as it was overtaken by Lenovo and Huawei Technologies, according to data compiled by Bloomberg.

The company probably spent more than 200 billion won on marketing in the December quarter, said Greg Roh, of HMC Investment Securities in Seoul.

BY MOON GWANG-LIP, CHOI JOON-HO, BLOOMBERG [joe@joongang.co.kr]