World No.2 TV maker LG Electronics <066570.KS> said it aims to turn around its struggling mobile division with double-digit shipment growth in the second-quarter, adding strong TV sales would lead to better results in the period.
LG, also the world's No.3 handset maker, has seen its mobile phone business suffer this year, trailing Nokia and Samsung Electronics Co Ltd <005930.KS>. It competes with Sony Corp <6758.T> and Panasonic Corp <6752.T> in flat-screen TVs.
Its appliance and TV businesses are performing strongly and LG's mobile phone margin has likely hit a bottom, said Kim Ji-san, an analyst at Kiwoom Securities.
Handset margins will improve in the coming quarters as the company beefs up its lineups in feature phones and smartphones.
In this quarter, LG's TV division swung to a deep profit and accounted for nearly 40 percent of the group's total profit, while earnings from handset sales tumbled to around one-tenth and made up less than 1 percent of total profit.
Mobile phone sales dropped to 27.1 million units from 34 million handsets sold in the fourth quarter and profit margins fell to 0.9 percent from 6.4 percent a year ago.
Long-term outlook for the company hinges largely on when and how strongly its handset division regains its lost momentum.
LG chief executive Nam Yong, who sought $2.7 billion cost savings last year, said in a recent interview that only companies which win the smartphone war would survive for the next 10 years in the fast changing technology industry, underscoring his desire to reshape his company's struggling smartphone business.
LG's business momentum turned weaker since late last year when its handset unit struggled with delayed product launches, a lack of hit models and the firm's slow response to the booming smartphone market, in which LG has less than one percent global market share.
We aim to boost second-quarter mobile phone shipments by a double digit percent from the first quarter and improve profitability with high-end models such as smartphones, LG said in a statement.
The maker of Infinia and Xcanvas TVs expects TV sales would remain strong in the second quarter thanks to the World Cup soccer event and increased shipments of high-end models such as LED-backlit LCD TVs.
Its TV business is set to overtake handsets as a main growth driver this year but soaring component costs and strengthening won could crimp earnings, while its Japanese rivals led by Sharp and Sony are fighting back to regain their lost market share.
Sharp Corp <6753.T> on Tuesday beat market expectations with a forecast for annual operating profit to more than double to its highest in three years.
By 1:15 a.m. ET, LG shares rose 0.4 percent after hitting a 7-month high on easing handset worries.
The South Korean firm said operating profit including earnings from overseas units rose 4.7 percent to 489 billion won ($440.5 million) in January-March, broadly matching a consensus forecast of 497 billion won polled by Thomson Reuters I/B/E/S.
LG has shifted its focus to smartphone offerings to boost razor-thin margins and catch up with bigger rivals such as Apple .
Its smartphone woes come as the world's top handset maker Nokia shocked investors last week by cutting its profit outlook and delaying smartphone launches needed to challenge hot-selling products such as iPhone and Blackberry, highlighting how difficult it is to crack into the fast-growing high end of the market.
Ahead of its results announcement, LG was forecast to report a 2.7 trillion won global operating profit for 2010.
(Additional reporting by Rhee So-eui; Editing by Valerie Lee)