By Kim Yoo-chul
LG Electronics reported its worst-ever quarterly operating loss for the July to Sept. period, which industry observers consider an inevitable result for napping during the smartphone boom.
The company appears to be losing ground in consumer electronics, including flat-screen televisions and white goods, adding to the headaches of new chief executive Koo Bon-joon.
The outlook is bleak for the fourth quarter as well as LG Electronics finds its star quickly fading in mobile phones and its television business, strained by intensifying price competition against other major makers such as Samsung Electronics and Sony.
LG Electronics’ third-quarter net profit of 7.57 billion won (about $6.7 million) represented a staggering 99.2 percent decline from last year’s numbers, while its operating loss of 185.2 billion won was the first time the company dipped into the red in the category since 2007.
Revenue dropped 2.1 percent to 13.43 trillion won in the quarter, LG Electronics said in a regulatory filing, Thursday.
LG Electronics’ recent business struggles led to the ousting of former CEO Nam Yong, whose decision to focus more on expanding the company’s sales of low-end feature phones instead of meeting the smartphone challenge head-on is now proving to be a colossal mistake.
The company’s handset division posted an operating loss of 303.8 billion won in the third quarter, while sales fell by around 7 percent.
LG Electronics has yet to show its products can compete with the iPhone and BlackBerry, in contrast to its domestic rival, Samsung, which appears to be finally making a breakthrough in the market for smartphones that run on the Google-backed Android operating system.
LG Electronics is still the world’s third-largest handset vendor behind Nokia and Samsung, but its status as an also-ran in the market for smartphones, which provide larger margins than conventional phones, doesn’t inspire any confidence for the future.
LG Electronics is also the world’s second-largest flat-screen television maker, behind Samsung, and established leaderships in products such as air conditioners, but waning demand in the North American and European markets is a concern.
``The outlook for the fourth quarter is also not good. Things may turn around next year when we will have a better smartphone lineup and also better televisions,’’ an LG Electronics spokesman said.
``Despite the overall profit crush, we still think our television and home appliance units performed admirably.’’
LG Electronics’ television division posted an operating profit of 123 billion won on revenue of 5.36 trillion won, after the company sold a record 6.6 million televisions during the third quarter.
However, it remains to be seen whether the company’s lucrative streak can carry on to the fourth quarter as the price competition continues to intensify.
``We forecast LG’s operating loss to continue in the fourth quarter due to higher costs of handsets, sluggish television demand and fierce price competition in home appliances,’’ Japanese brokerage Nomura said in a recent report.
Not all LG technology units had a bad third-quarter.
LG Innotek, a components maker, saw its third-quarter operating profit increase by more than 400 percent year-on-year to 63.1 billion won, on sales of 1.17 trillion won, which represented a 44 percent increase from last year’s number.
Hynix Semiconductor, the world’s second-largest maker of memory chips behind Samsung, posted a record third-quarter net profit of 1.06 trillion won, more than a four-fold increase from last year’s 246.3 billion won, on an operating profit of 1 trillion won.
Its sales grew 53 percent over the period to 3.25 trillion won, the company said in a regulatory filing.
In a conference call to analysts, Hynix said the better-than-expected result was due to its faster technology migration that allowed for a more cost-effective process for manufacturing chips, which gave it an edge over its Taiwanese and Japanese rivals.
``Uncertainties over the global economy haven’t been fully removed yet, however, Hynix will ship more value-added memory chips such as mobile DRAMs to meet rising demand from bigger handset and PC makers,’’ said James Kim, the head of its investor relations division.
Industry watchers say Samsung Electronics and Hynix Semiconductor will end the year with more solid earnings than their international competitors thanks to better management in chip-making technology and solid client bases.