LG profit hit by smartphone rivals

LG Electronics reported a lower quarterly profit today 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 its April-June net income totalled 159 billion won (€114m) on revenue of 12.9 trillion won (€9.2m).

Quarterly income was up nearly 50% from a year earlier but fell 35% 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 in LG fell 2.1% in Seoul compared with the benchmark Kospi’s 1.4% decline.

LG, which was unseated by Apple last year as the world’s number three mobile phone maker by sales, blamed its lower profit on the mobile phone division’s 57 billion won (€39m) quarterly operating loss. That partly offset profit from LG’s TV business.

Basic handset sales declined while expenses to promote 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 a trillion won (€718m) in 2010 and 2011 combined as its Optimus smartphone series failed to compete with Samsung’s Galaxy 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 sceptical 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.

Quarterly operating profit from LG’s TV business more than doubled from the previous year 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.