LG cuts smartphone, handset targets, launches 3D phone

Posted at 07/07/11 6:05 PM

SEOUL - LG Electronics Inc, the world's No.3 handset maker, cut its 2011 smartphone and handset targets on Thursday because its Optimus series has failed to stop the runaway success of Apple's iPhone and Samsung's Galaxy S.

The South Korean firm also declined to predict when the loss-making division will make a turnaround from four consecutive quarterly losses.

"Our overall performance is gradually improving...but it's difficult to give a precise prediction when our business will turn around due to a fast changing external market environment," Park Jong-seok, head of LG's handset division, told reporters.

LG forecast on Thursday its smartphone sales would reach 24 million units this year, down from its previous target of more than 30 million units, while its overall handset target was slashed by a quarter to 114 million units from 150 million units.

In the first half, LG sold almost 50 million mobile phones including slightly more than 10 million smartphones, Park said.

LG is likely to report a fifth consecutive quarterly loss from handset sales in the April-June quarter because it has failed to introduce products to challenge Apple and Samsung and due to weakening demand growth for feature-packed handsets.

But it has been gradually narrowing its losses and its overall performance is recovering, helped by solid demand for such models as the Optimus 2X and Optimus Black.

Analysts expect second-quarter losses from handset sales to narrow to around 70-90 billion won from a 120 billion won ($112.5 million) loss a year ago when it reports quarterly results later this month.

"In mature markets, the LG brand is still considered a step down from Samsung, which makes their products less appealing," said Carolina Milanesi, a Gartner analyst.

"HTC now means more to many consumers than LG. LG has been struggling to deliver more than just hardware and with the weaker brand, they are left many times to compete on price."

By comparison, Samsung is widely expected to sell at least 19 million smartphones in the second quarter and easily beat its 2011 smartphone target of 60 million units, helped by solid sales of a new version of its Galaxy S.

Samsung estimated on Thursday its second-quarter operating profit would come in at 3.7 trillion won and analysts expect a upside surprise from the handset division.

LG introduced on Thursday the Optimus 3D smartphone in South Korea and hopes to sell 1.7 million units this year. The phone runs on Google's Android platform and uses Texas Instruments Inc.'s OMAP mobile processors. It will be available through South Korea's top mobile carrier SK Telecom.

LG is betting the 3D smartphone will help it expand into the portable gaming hardware market, which is dominated by the likes of Japan's Nintendo and Sony Corp.

The Optimus 3D, which has a 4.3-inch display and two cameras, comes with preloaded 3D games made by mobile video game specialist Gameloft SA.

In the second half, LG's new product lineup will include LTE (long-term evolution) phones and smartphones with high definition displays, Park said.

Shares in LG closed down 1.8% versus a 0.4% gain in the wider market.