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Monday, July 18, 2005
LG Profit Plunges 70% as Mobile Phones Post 1st Loss

LG Electronics, the world's fourth-largest maker of mobile phones, posted a 70 percent drop in quarterly profit as competition from Nokia and other companies drove LG's handset business to its first loss.

Second-quarter net income fell to 151 billion won ($145 million) from 493 billion won a year earlier, Seoul, South Korea- based LG said in a regulatory filing. Operating profit fell 63 percent to a lower-than-expected 144 billion won and revenue dropped 7 percent to 5.6 trillion won.

LG forecasts the "difficult" business environment to continue in the current quarter, underscoring how the company is being forced to cut prices to keep up with Nokia, Motorola Inc., and other mobile-phone makers in a slowing industry. Samsung Electronics Co., the world's third-largest handset vendor, last week posted a lower-than-expected profit from telecommunications, citing increased competition.

Operating loss from mobile phones, the first since the company was reorganized in 2002, was 4 billion won, compared with a profit of 123 billion won a year earlier. Including network equipment, the telecommunications division's second-quarter operating profit plunged 94 percent to 8.4 billion won, LG said in a press release.

Mobile phone sales fell 5.2 percent to 1.8 trillion won, or 12.1 million units, the company said. The company missed its mobile phone shipment target for a second consecutive quarter.

The company's display business, including sales of plasma display panels, posted a 22 billion won loss and sales fell 2.3 percent to 1.2 trillion won.

As growth in demand for new handsets slows in countries such as the U.S. and Japan, industry shipments are poised to rise 8 percent this year after jumping 32 percent to 680 million units last year, according to Strategy Analytics.

Samsung last week reported operating profit from telecommunications declined 33 percent to 530 billion won, missing analysts' estimates of 630 billion won. The company cited increased competition for driving down prices.

Sony Ericsson Mobile Communications Ltd., the cellular-phone venture owned by Sony Corp. and Ericsson AB, on July 15 posted a 19 percent drop in second-quarter profit as it introduced lower- priced handsets to win customers.

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