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|30th January 2013, 12:17||#1|
Join Date: May 2010
LG in a spin
Telly maker LG has failed to live up to the expectations of the cocaine nose jobs of Wall Street.
Profits in its TV division have fallen to a tenth of year-earlier levels despite the company's attempts to increase promotional spending in the year-end holiday season.
Now it seems that winter is coming to the television market this year and research firm DisplaySearch thinks that there will be flat global TV sales. In times of economic uncertainty in developed economies people don't buy new flat screens when they already own one.
Currency rates also look dodgy. The won has strengthened, reducing the value of earnings made abroad while weakness in the yen has boosted the price competitiveness of Japanese rivals.
According to the Wall Street Journal, LG's October-December operating profit came in at $98.84 million which was up 25 percent from a year earlier but below a Wall Street forecast.
LG said the profit margin at its TV business declined for a second straight quarter to 0.3 percent from 0.8 percent in the previous quarter and 5.7 percent in the second quarter. Part of the reason for the fall was the increase in marketing costs.
The value of LG shares have been almost flat over the past three months, underperforming a three percent gain in the wider market.
The company's figures were not helped by the fact that in December, the European Commission imposed the biggest antitrust penalty in its history, fining six firms including LG, Philips, Panasonic and others a total of 1.47 billion euros for running two cartels for nearly a decade.
It is also expected to see a slowing of its smartphone business as cheap and cheerful Chinese players such as Huawei and ZTE make a stronger impact in the market.
LG is trying to break into the high-end smartphone market, with only minor success so far. In the fourth quarter it sold 15.4 million handsets, lifting its mobile business into profit for the first time.
LG this month started taking pre-orders for its next-generation 55-inch TV that uses OLED technology, allowing for thinner displays that consume less power. The only downside is that each unit will cost $10,000 so they will not take off any time soon. LG is also expanding sales of 84-inch ultra-high-definition sets, which boast four times better picture quality than full HD models.
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