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Cable Technology Feature Article

January 31, 2013

LG Electronics' TV Profits Take a Nosedive

By Shankar Pandiath, TMCnet Contributor

LG Electronics (News - Alert), the world's second largest TV maker, fell short of its projected forecast for the last quarter (Q4) of 2012 with profits in its TV sector diving to about one tenth of the previous year.

LG Electronics’ total operating profit for the 2012-Q4 about $98.84 million (107 billion won), which when compared to the year before, was up by 25 percent. This was minus the massive fine that it had received from the EU for rigging prices of cathode-ray tubes for years up until 2006. The EU had fined LG Electronics about $664 million (about 730 billion won) sometime last year (2012). LG, however, plans to appeal.

Profits were down when compared to the projected levels of 151 billion won. However, the TV profits fell to around one-tenth of the previous year in addition to the TV profit margin being down for the second straight quarter. However, LG’s phone business showed an increased profit of 55 billion won.

LG’s net loss totaled about $429 million (468 billion won) for the 2012 Q4, compared with a loss of 112 billion won the previous year. However, operating profits, minus the fine, increased by about 25 percent over a year earlier to about $98.84 million (107 billion won). Revenue dipped slightly to about $122 billion (13.5 trillion won)

LG also said that its poor performance in the last quarter of 2012 was primarily due to sluggish consumer demand and the intense competition among TV makers, in addition to the slump in currency exchange rates.

LG is all set to face a difficult 2013 with uncertain forecasts for global flat-TV sales given the current economic scenario. Besides, most people in developed economies already possess a flat-screen TV.

LG has already started taking orders for its next-generation 55-inch TV with OLED technology that consumes less power and comes with thinner displays. The negative side is that it costs about $10,000 and with this price tag (News - Alert) it is difficult to perceive any increase in profits in the immediate future. The company is also planning to boost its sales for its “84-inch” ultra-high-definition sets, which has about four times better picture quality than a full HD model.

While LG currently controls about 18 percent of the world TV market, it comes a close second to Samsung Electronics, which has about 21 percent of the market. However, Japanese makers, led by Sony Corp, Panasonic Corp and Sharp (News - Alert) Corp, control about 30 percent.

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Edited by Brooke Neuman

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