LG’s handset division is falling behind
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LG Electronics Co. Ltd. is doing well in the handset business, though the company’s handset division is settling into fifth place globally, well behind Sony Ericsson Mobile Communications L.P., which overtook LG by volume in the first quarter.
LG today reported company-wide, second-quarter global sales of $11.2 billion, up 12.6% from the year-ago quarter. Net profit reached $496 million, up wildly over the year-ago quarter’s loss of $10 million.
The company’s handset business helped strengthen sales and earnings in the second quarter, according to LG. Its other divisions include digital appliances, digital displays and digital media. The company also credited results in its digital appliance division, which experienced a seasonal burst in sales of air conditioners. Digital displays dragged on revenue and profit, the company said.
The Korean vendor’s handset shipments reached 19.1 million units, a more than 25% jump over the year-ago quarter. Sony Ericsson last week reported it shipped 25 million units in the second quarter, a 60% jump over its year-ago quarter.
LG said that its handset profits were boosted by the sale of W-CDMA and CDMA phones in North America, and large shipment increases in GSM phones heading to Europe and Central and South America.
The outlook for the third quarter is mixed, according to the company. LG expects strong handset-shipment growth accompanied by a decline in handset profits, due to lower margins on large volumes shipped into emerging markets.
In that sense, LG is experiencing similar difficulties that other top vendors have had in following Nokia Corp.’s successful effort to meet demand in emerging markets: shipment growth aids in market share gains, but profits tend to suffer.
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