LG’s handset volume up, revenue and profit down

LG Electronics Co. Ltd, whose handset division last year slipped from No. 4 to No. 5 in global rankings, posted drops in revenue and operating profit for the fourth quarter of 2006. Handset shipments in the final quarter rose slightly.
Drops in revenue at LG’s digital display business were exacerbated by significant drops in revenue at the company’s handset business.
The company’s mixed bag-which showed relatively steady handset shipments but lower revenues and profits in its handset business-appears to reflect both the company’s own struggles as well as broader market trends. Analysts have noted in past weeks that emerging markets, with low margins, remain strong while mature markets, where margins are relatively high, have cooled. In December, LG shuffled at least 35 executives, including its corporate chief executive and its handset business chief executive, in an effort to regain its footing.
The company’s handset division-its largest-shipped 17 million handsets in the fourth quarter, more than half in CDMA markets, a 5-percent increase over the year-ago quarter. Revenue in the handset business alone reached $2.3 billion, down 11 percent from the year-ago quarter. Operating margins dropped to 2.7 percent, a 1-percent drop from the prior quarter. The company did not provide operating margin data from the year-ago quarter.
LG’s operating profit in its handset business clocked in at $62.8 million, down 25 percent from the previous quarter and down fully 70 percent over the same quarter a year ago.
LG projected that handset shipments in 2007 would reach 78 million units, a 22-percent jump from the 64 million phones it shipped in 2006.
Quarterly revenue at the parent corporation reached $5.9 billion, down 11 percent from the year-ago quarter. The company posted a loss of $46 million in operating profit.
In its digital display business, LG’s fourth-quarter sales decreased 14 percent to nearly $1.3 billion. Digital appliance revenue rose nearly 6 percent to $1.4 billion.
For the entire year, LG posted $24.2 billion in revenue, a 3-percent decline from 2005. Net profit was $222 million; no comparison data were given for the prior year. Annual handset shipments reached 64.4 million units, a 17-percent jump compared with 2005.