LG smartphone funding plan causes concern - Mobile World Live

LG smartphone funding plan causes concern

03 NOV 2011

LG Electronics is planning to raise more than KRW1 trillion (sources put the figure at around US$940 million) through a share issue, in order to raise funds to bolster its core businesses – including its struggling smartphone division.

According to the Financial Times, the company saw its share price fall by more than 10 percent following the announcement.
The South Korea-based electronics giant said that: “the stock sale is aimed at securing financing for investment in our core businesses. We plan to revive our global competitiveness in key areas such as smartphones through steady investment.”

The company reported a loss of KRW414 billion (US$367 million) for the third quarter of 2011, compared to a profit of KRW7.6 billion a year ago, on sales which fell 4 percent to KRW12.90 trillion. Its mobile division reported a loss of KRW138.8 billion, with a KRW139.9 billion loss from handset sales, on sales which fell 8.5 percent to KRW2.8 trillion.

According to research firm ABI, LG is also set to lose its third place in the global handset market to Chinese rival ZTE in the near future, with the companies having similar market shares in the third quarter of 2011. LG has been widely criticised for being slow to recognise the potential of smartphones, as the market shifted away from the feature phones on which it had built its success.

Chung Yun Sik, the chief investment officer for equities at ING Investment Management Korea, told Bloomberg that it is still unclear how the company intends spending the new cash: “without a clear explanation, there won’t likely be an immediate rebound in the stock price.”

Ratings firm Fitch also cut LG’s outlook earlier this week, stating that it is unlikely to return to competitiveness in the short term.


Steve Costello

Steve works across all of Mobile World Live’s channels and played a lead role in the launch and ongoing success of our apps and devices services. He has been a journalist...More

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