LG strong in U.S., hit in Europe, India

Korean vendor LG Electronics Co.’s market share slid as it was hit by a slowdown in Europe and India, but the mobile devices company remained strong in the United States, according to results released today.
LG’s strength in the U.S. sets the table for Apple Inc.’s results, due tomorrow. Apple’s earnings are widely expected to reflect the health of consumer spending in the U.S.
LG’s handset division posted a 41% rise in revenue over the year-ago quarter and a nearly 100% rise in operating profit in the same period, but analysts saw sequential declines that reflected hostile macro-economic conditions and served as the most current indication of weakening consumer spending.
LG has maintained a relatively high-end mix of handsets, lifting its average selling price to about $145. But the company said it would enter the low-tier handset market early next year to compete with its larger rivals. LG is the fourth-largest handset maker in the world after Nokia Corp., Samsung Electronics Co. Ltd. and Motorola Inc.
Still, handset sales remained a bright spot for the industrial conglomerate, which overall posted a 93% drop in net profit from the year-ago quarter.
From the second quarter of this year to the third quarter just ended, LG’s handset revenue declined 6.4% and operating profit declined about 25%. Though shipments were up 5% over the year-ago quarter, they declined sequentially to 23 million from 27.7 million in the second quarter, below LG’s expectations after the second quarter. Operating margins in handsets rose to 11.4% in the third quarter, up from 8.4% in the year-ago quarter, but down sequentially from 14.4% in the prior quarter.
LG’s global market share fell to 7.4% in the third quarter from 9.1% in the second quarter, according to analyst Ittai Kidron at Oppenheimer. North American shipments were a bright spot, growing 10% sequentially.
The company said in its outlook that seasonal growth is expected sequentially in the fourth quarter, but growth over last year’s fourth quarter would be “slow.” Still, LG said it would reach 100 million handset shipments for the entire year.
In the face of a growing global recession, LG said it would “initiate appropriate pricing strategies” and “strengthen inventory management” efforts. The company said it expected to retain double-digit profitability from a portfolio mix heavy with premium models, particularly QWERTY-equipped phones in the U.S. The company is also planning to launch an affordable touchscreen phone dubbed the “Cookie.”