UPDATE 3-LG Elec eyes World Cup TV boost, cautious on mobiles

* Q1 operating profit 489 bln won vs 497 bln won mkt
forecast

* Mobile profit tumbles on weak line-up, smartphone woes

* Seeks 10-20 pct mobile shipment growth in Q2 vs Q1

* Sees strong flat-screen TV momentum this year

* Shares hit 7-mth high on handset hopes, end down 0.4 pct
(Adds comments, details, updates shares)

By Miyoung Kim

SEOUL, April 28 (BestGrowthStock) – World No.2 TV maker LG
Electronics warned that profits at its struggling mobile
division would be slow to recover, but it expects this summer’s
soccer World Cup to drive TV sales and push up next quarter’s
earnings.

LG (066570.KS: ), also the world’s No.3 handset maker, has
seen its mobile phone business suffer this year, trailing Nokia
(NOK1V.HE: ) and Samsung Electronics Co Ltd (005930.KS: ). It
competes with Sony Corp (6758.T: ) and Panasonic Corp (6752.T: ) in
flat-screen TVs.

Chief Financial Officer David Jung told analysts that
turning LG’s mobile business around was “top priority” and it
planned to introduce competitive models from this quarter,
though it would take “a bit more time” to really improve
profitability.

“Its appliance and TV businesses are performing strongly
and LG’s mobile phone margin has likely hit a bottom,” said Kim
Ji-san, an analyst at Kiwoom Securities.

LG’s TV division swung to a profit in the first quarter and
accounted for nearly 40 percent of the group total, while
earnings from handset sales tumbled to around a tenth of
year-ago levels and accounted for less than 1 percent of total
profit.

“Overall demand for home appliances is strong and we expect
solid results to continue toward the end of this year… and
our TV business may also perform better than the market
expects,” Jung said.

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For StarMine comparative data: http://r.reuters.com/bax69j

For a Graphic on global smartphone market and forecasts:

http://graphics.thomsonreuters.com/0210/KR_SMTPH0210.gif

For a Graphic on global quarterly handset sales since 2008:

http://graphics.thomsonreuters.com/10/GLB_HDSTSL0410.gif

For a Graphic on LG’s handset margin, share prices:

http://graphics.thomsonreuters.com/10/KR_LGELC0410.gif

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The long-term outlook for LG hinges largely on when and how
strongly its handset division regains lost momentum.

CEO Nam Yong, who sought $2.7 billion in cost savings last
year, said in a recent interview that only companies which win
the smartphone war would survive for the next 10 years in the
fast changing technology industry, underscoring his desire to
reshape LG’s struggling smartphone business.

LG, which aims to increase handset sales by 19 percent to
140 million units, said its second-quarter shipments would rise
10-20 percent from the previous quarter.

Mobile phone sales dropped to 27.1 million units in
January-March from the fourth-quarter’s 34 million, and profit
margins slumped to 0.9 percent from 6.4 percent a year ago,
though they picked up from just 0.2 percent in the fourth
quarter.

MOMENTUM SLOWS

LG’s business lost momentum late last year when its handset
unit struggled with delayed product launches, a lack of hit
models and the firm’s slow response to the smartphone boom. LG
has less than 1 percent of that global market.

Analysts are mixed over whether LG can re-energise its
mobile business. It plans to boost marketing to drive
shipments, but the competition is only getting tougher as more
firms join the smartphone race.

LG has shifted focus to smartphones to boost razor-thin
margins and catch bigger rivals such as Apple Inc (Read more about Apple stock future.) (AAPL.O: ).

“It’s hard to foresee a strong recovery in the handset
segment this year … a risk LG Electronics must watch out for
is competition as Apple is looking to enter other segments,”
said Kim Kap-ho, an analyst at LIG Investment.

The maker of Infinia and Xcanvas TVs expects TV sales to
remain strong this quarter ahead of the World Cup and increased
shipments of high-end models such as LED-backlit LCD TVs.

LG’s TV business is set to overtake handsets as a main
growth driver this year, but soaring component costs and a
stronger won currency could crimp earnings, while Japanese
rivals Sharp and Sony are fighting back to regain lost market
share.

Sharp Corp (6753.T: ) on Tuesday forecast its annual
operating profit would more than double this year to its
highest in three years. [ID:nTOE63P09F]

LG said January-March operating profit including earnings
from overseas units rose 4.7 percent to 489 billion won ($440.5
million), broadly matching a consensus forecast.

Ahead of the results, LG was forecast to report a 2.7
trillion won global operating profit for 2010.

Investing Basics

(Additional reporting by Rhee So-eui; Editing by Valerie Lee
and Ian Geoghegan)

UPDATE 3-LG Elec eyes World Cup TV boost, cautious on mobiles