LG Posts 33% Second Quarter Loss

Lackluster performance of handset division, higher R&D and marketing costs responsible for depressed financial performance, says company.

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LG Electronics posted a 33% net income loss for its second quarter earnings, largely due to problems in its mobile handset business, the Seoul, South Korea-based company reported Tuesday. The handset division's overall operating profit dropped 90% to $126.2 billion, its biggest loss since the world's number-three phone maker began tracking the division's financials in 2002, according to Bloomberg.

Analysts are projecting LG's third-quarter earnings will continue to be lackluster, but may pick up in the fourth quarter with the debut of a new Google Android-based smartphone, which will be sold globally through 120 carriers. LG's handset division hasn't yet produced a model to compete against Apple's iPhone or Android phones made by Samsung and HTC.

In the current quarter, phone shipments should increase by a low single digit percent, LG said. In the second quarter, 30.6 million mobile phones were sold, compared to 27.1 million shipments in the first quarter, the company said. The lower profits were attributed in part due to research and development costs and marketing.

LG financial officer David Jung said the fourth quarter is when LG expects to see its business recover, and that its Android-powered handsets will make up more than half of its smartphone models this year, Bloomberg reported. In the third quarter, LG said it expects shipments to increase 4% from growing demand in emerging markets and in Europe.

The company said its strategy is to boost market share with new mid-priced handset models, which will include the Optimus Z and Optimus One with Google. Other new models include the LG-T300 Full Touch and GW380 messaging device, the company said.

Profits in LG's TV and DVD player division dropped 90% to $28.1 billion. Sales increased 19% in the division. LG's home appliances division saw a profit increase of 3.8% to $185.1 billion.

"LG will continue to introduce new products in major categories including smartphones, while investing aggressively in R&D and marketing and developing premium products in order to secure a stronger position in respective categories," the company said in a statement.