Smartphones flatten LG profit

LG Electronics reported a slight rise in its first quarter operating profit as strong sales of its TVs and home appliances cushioned the negative impact of its ailing smartphone business. 　

However, the world's No. 3 handset vendor, said it saw no immediate recovery of its handset business.

"We are still in a difficult situation in our handset business. We think that we need time to improve our profitability in handsets," David Jung, chief financial officer of LG Electronics, said at a meeting with investors yesterday.

"The most urgent task for LG this year is to recover its handset competitiveness and profitability."

He said, however, LG's other major businesses -- TVs, home appliances and air conditioners -- are expected to post rises in both sales and profit in the second quarter.

LG, the world's No. 2 TV maker, raised its 2010 sales target for flat-panel TVs by 17 percent to 34 million units, from 29 million units, a local report said yesterday. An LG spokesperson did not confirm the figure, although he said LG has increased its LCD TV sales target for this year "by double-digits." Jung said that the company could raise its sales target for LED LCD TVs from the current 7 million units.

LG's first-quarter operating profit inched up 4.7 percent to 488.8 billion won from a year ago, while its sales edged up 2.6 percent to 13.1 trillion won during the period.

Its handset business saw its operating profit plunge by 89 percent to 27.7 billion won from a year ago. LG sold 27.1 million units of handsets in the first quarter, up 20 percent from a year ago. Smartphone sales are fast growing and encroaching on the mid- and high-end feature phone market, the stronghold of LG and other traditional handset makers.

In contrast, LG's TV division swung to an operating profit of 182 billion won. Its shipments of flat-panel TVs also jumped 58 percent to 6 million units, year-on-year. Its home appliance business also saw its operating profit jump 56 percent to 207.4 billion won.

LG's Air Conditioning division saw its profits fall 32.2 percent to 42.9 billion won, whereas its Business Solutions unit saw its profits climb 9.9 percent to 34.4 billion won.

"LG's first-quarter earnings reflected market concerns over its handset business. ... It will take time for LG to be able to revive its handset business," said Han Eun-mee, an analyst at Hi Investment & Securities.

The company's other businesses -- TV, home appliance and air conditioners -- are expected to post solid performance in the second quarter, she added.

By Jin Hyun-joo ( hjjin@heraldm.com)