South Korea’s LG Electronics hasn’t been so smart with its smartphone business. Its mobile phone division has suffered five consecutive quarterly losses, cutthroat competition is pressuring it to overhaul the business and its shares have plummeted. The money-losing phone unit has also been a major value destroyer for LG shareholders. LG’s market value is only USD 7.5 billion, roughly one-third that of global rivals HTC Corp and Nokia, even though it also has sizeable TV and home appliances divisions.
LG’s handset division is the company’s biggest capital sinkhole and the shares have more than halved this year, making it the worst performer even when compared to HTC and Nokia. LG says it is committed to its phone unit and is racking up successes, but investors aren’t really listening. “Selling the loss-making business is probably what investors want,” said Harrison Cho, an analyst at KB Investment & Securities. “But even with that option, LG wouldn’t get much from the sale. They should have sold it long ago before the overall landscape got tougher.”
“They simply missed the boat,” said Cho.
Setting up ventures with the likes of Philips and Nortel to share risks is what LG has done in the past in flat-screens and telecom gear. But analysts say there may not be many potential partners keen to team up with the loss-making mobile phone business. The changing of the guard at Apple Inc could offer opportunities for rivals to chip away at the technology powerhouses’s strongholds in some sectors, but on a standalone basis, LG is limited by its scale of operations in smartphones.
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