By ReutersInformationWeek
SEOUL, May 26 - LG Electronics, the world's No.4
handset maker, is closely watching rival Nokia amid talk the
top-ranked mobile phone maker may cut its prices and re-enter
the South Korean market later this year.
Shares in LG Electronics tumbled more than 8 percent on
Monday as investors gauged the impact of potential price cuts
by Nokia. But an LG executive said the firm was generally
positive about the industry this year.
"We are interested in the Korean market and investigating
it, but we have not unveiled any products for that market,"
said Nokia spokesman Kari Tuutti, declining comment on future
pricing.
LG shares ended down 3.8 percent, while Samsung
Electronics, the world's No.2 handset maker, closed down 4
percent. The main Korean market fell 1.5 percent.
"We are carefully watching Nokia," Chang Ma, LG's vice
president for marketing strategy, told Reuters in an interview.
Analysts were split on the impact of a Nokia move.
"Nokia's handset price cuts, if they actually happen, will
certainly not be applied universally to all its models," said
Lee Sung-june, an analyst at SK Securities.
"Besides, Nokia and LG's handset strategies are different
in that while Nokia is more about offering cheaper models, LG
is more focused on technologically advanced models."
John Park, analyst at Daishin Securities, noted that since
LG had benefited from Nokia losing market share in North
America, the Finnish firm's possible expansion in that market
could be a factor to watch for LG.
Ma said LG was also ready to seize any opportunities
arising from difficulties at third-ranked Motorola Inc and No.5
manufacturer Sony Ericsson
Motorola has been losing market share to rivals after
failing to follow up its blockbuster Razr phone, and Sony
Ericsson saw its profit halved in the first quarter as demand
slowed for its more expensive camera and music handsets.
"We see some risks from the economic slowdown, the rise of
raw material prices and the possibility of unexpected moves by
competitors, but we will compensate these risk factors with our
product portfolio and our marketing strength," Ma said.
LG sold a record 24.4 million phones in January-March and
looks set to beat its target of 100 million phones for the
year.
First-quarter operating profit margin on handsets was 15.9
percent on a parent basis, almost double the previous quarter's
8.3 percent and against 6.6 percent a year earlier.
Ma said he expected the handset division to post a "double
digit" operating profit margin in the second quarter.
"The handset business remains strong in LG's overall
earnings, accounting for as much as 80 percent of operating
profit throughout 2008," said Daishin's Park, though he added
that handset marketing costs would likely grow and eat into
margins in the third and fourth quarters.
In a separate interview, the head of LG's display division
said the company's plasma business had suffered from lower than
expected demand this year, but hopes to improve operating
profits during the rest of the year.
"We are aiming to post better second-quarter operating
profit ... from the first quarter," said Simon Kang,
responsible for LG's plasma business, which makes screens for
LG's own televisions and for external customers. "We also
expect to post better operating profit in the second half from
the first."
Kang acknowledged that demand from China had been slower
than initially expected due to the snowstorm early this year
and the recent earthquake.
LG is expected to post 2008 net profit of 2.5 trillion won,
more than double last year's 1.2 trillion won, according to
Reuters Estimates.
(Additional reporting by Tarmo Virki in HELSINKI and Park
Jung-yun and Park Ju-min in SEOUL; Editing by Ian Geoghegan)
Copyright 2008 Reuters. See original article on InformationWeek
0 comments:
Post a Comment