SEOUL, South Korea— LG Electronics Co. Ltd. reported a net loss of $10.1 million on static sales of $6.1 billion in the second quarter on lackluster handset shipments and poor performance in its liquid crystal display joint venture with Philips Electronics. The net loss stands in contrast to the vendor’s year-ago quarterly profit of $157 million. Sales were marginally better than the $5.75 billion in the year-ago quarter.
Handset revenue accounted for about one-third of the electronics conglomerate’s total revenue; LG also makes durable goods and consumer electronics products. A poll of financial analysts by Reuters had expected a net profit of about $80 million.
According to CIBC World Markets, LG will likely miss its 2006 handset shipment volume forecast of 70 million units; the firm suggested 65 million to 67 million may be more realistic. Distribution and brand-building investments will push down margins, according to CIBC analyst Ittai Kidron.
LG’s “Chocolate” mobile phone has not triumphed in Europe, as hoped, yet the company said the phone’s success overseas is “the key for further success.” W-CDMA handset shipments face competition as well. According to Kidron, these competitive pressures may affect LG’s supply chain, which includes Qualcomm Inc. (for CDMA and W-CDMA chipsets) and RF component suppliers Skyworks Solutions, RF Micro Devices, Anadigics Inc. and TriQuint Semiconductor Inc.
LG’s results come on the heels of Samsung Electronics Col Ltd.’s quarterly earnings, announced last week. Samsung said its sales fell 4.5 percent to $4.2 billion from the year-ago quarter, based on shipments of 26.3 million handsets. The numbers were below analysts’ dampened expectations. Operating profit in Samsung’s telecommunications division—comprised largely of its mobile phone sales—fell 24 percent from the year-ago quarter to $429 million.
