Profit from LG's TV business doubles as handset division sees loss

LG Electronics reported a lower quarterly profit as its mobile phone division sank to a loss, underlining the challenges for its smartphone business as it struggles with competition from Apple and Samsung.

The South Korean company said Wednesday its April-June net income totaled 159 billion won ($138 million) on revenue of 12.9 trillion won.

Quarterly income was up nearly 50 percent from a year earlier but fell 35 percent from the previous three months.

The quarter-on-quarter drop was a source of concern for investors as sales of consumer electronics are usually stronger in the second quarter. Shares of LG Electronics Inc. fell 2.1 percent in Seoul, compared with the benchmark Kospi’s 1.4 percent decline.

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LG, which was unseated by Apple Inc. in 2011 as the world’s No. 3 mobile-phone maker by sales, blamed its lower profit on the mobile phone division’s 57 billion won quarterly operating loss. That partly offset profit from LG’s TV business.

Taking on the big cars

Basic handset sales declined while expenses to promote its new smartphones went up, LG said.

The second-quarter mobile loss comes after the division briefly enjoyed two consecutive quarters of profit. LG’s mobile division lost nearly 1 trillion won in 2010 and 2011 combined as its Optimus smartphone series failed to compete with Samsung’s Galaxy phone and Apple’s iPhone.

Even as LG plans to expand its mobile market share with its Android-powered smartphones running on a fourth-generation wireless service, analysts are skeptical about its outlook.

Sales could falter if mobile chip shortages continue and the launch of the new iPhone, expected in the third quarter, could steal the spotlight from LG’s new handset release.

“It is tough to be sure about the recovery in LG’s mobile phone business,” said Eugene Kim, an analyst at Taurus Securities who has a hold rating on shares of LG Electronics.

Quarterly operating profit from LG’s TV business more than doubled from the previous year to 216 billion won. But the amount changed little from the previous quarter.

LG is betting on the release of a high-end television that uses an advanced display panel to boost TV profit. The company said TV markets in advanced countries will expand in the second half of this year despite a weak outlook for the global economy.

Associated Press