Sibling quest
Are Koo brothers navigating LG toward elusive turnaround?
By Kim Yoo-chul
LG Electronics CEO Koo Bon-joon admits the company's key handset and TV businesses are "still struggling."
Koo's honest assessment captures not just the difficulty the conglomerate faces but, perhaps more importantly, the spirit of the new man in charge.
The chief succeeded Nam Yong, a hired gun, meaning that he has a lot more to prove, considering he is part of the owner family.
Market analysts and stock investors are asking for LG to show its capability to release "wow" products to better compete with Apple and Samsung Electronics, and to regain its lost market share in the world of ``smart devices.’’
The rare admission was received as "quite a surprise" by local reporters because Koo doesn't normally comment about the company's pending issues.
"In mobile phones, it is impossible to return to the black from the second quarter. We are still struggling," said Koo during a meeting with reporters in Seoul.
Asked about business forecasts for LG's television unit, the chief executive said high inventories were denting profits.
Shares of LG Electronics ended at 93,100 won as of the end of last week, according to data from the Korea Exchange (KRX) ― the nation's main bourse operator.
LG Electronics shares have retreated by more than 20 percent this year as of June 6. South Korea's stock markets closed on Monday for National Memorial Day.
"I don't know," the chief executive said after being asked by reporters whether LG has seen some improvement under the helm of the new CEO.
LG's handset division had trimmed operating losses in the first quarter from the preceding quarter thanks to the release of its Optimus-branded smartphone series on developed markets.
Its home-entertainment division, which is in charge of the television business, had reported an 82 billion won operating profit for the first three months of this year from a 65 billion won operating loss a quarter earlier.
Questions were also asked as to whether an expansion of LG's in-house film-patterned retarder (FPR) 3D TV technology will be delayed as analysts say LG needs to promote it more to lower inventory.
An LG Electronics spokesman declined to unveil the number of 3D TV sales sold so far this year.
But LG executives told The Korea Times that the products were receiving good reviews.
More than anything else, its smartphone sales were stalled.
LG launched its Optimus 2X-branded smartphones in January for local consumers and March for customers in Asia, Europe and North America. So far 1 million have been sold.
"That was quite disappointing considering rival Samsung's upbeat sales of its Galaxy S II smartphones," said Kwon Sung-ryeol, an analyst at Dongbu Securities.
LG said in a statement it has sold 100,000 Optimus Blacks and Bigs since their introduction in May.
LG's tech leadership in smartphones is also being challenged because it recently scrapped a plan to develop a dual-use mobile chip that converts to LTE and 3G due to higher development costs.
LG's share in the global mobile phone market declined to 5.6 percent in the first quarter from 7.6 percent a year earlier, market research firm Gartner said.
"LG Electronics is preparing something. But the key problem is that it hasn't stamped leadership with its key products and management," said one LG executive, asking not to be identified as she wasn't authorized to speak to the media.
But Kim Ji-san, an analyst at Kium Securities, said the situation was becoming favorable to LG Electronics thanks to its steady initiatives in hardware, an increase in smartphones and the continued fall of Nokia of Finland.