Moody's downgrades LG's outlook to negative

Oct 13, 2011

Credit ratings agency Moody's on Thursday downgraded its outlook on South Korea's LG Electronics to negative, saying its position in the mobile phone business has weakened considerably.

Moody's Investors Service said in a statement that the outlook for LG's Baa2 issuer and senior unsecured debt ratings has been revised from stable to negative.

(LGE), the world's third-largest handset maker, is battling to turn around its loss-making handset operations, where it lags and Apple in offering high-margin smartphones packed with features.

LGE's mobile unit posted a record loss in the second quarter of 2010 due to a falling share of the booming global smartphone market.

Moody's said it expects LGE to face "a major challenge in significantly turning around the operating performances of its different business segments in the near term, given an uncertain ."

"We expect continued volatility in operating profits at LGE, reflecting partly the ongoing weakness in its handset unit and the intense level of competition," said Moody's senior analyst Annalisa DiChiara.

On Monday the company launched a new 4G smartphone with ultra-high-speed network technology based on Long-Term Evolution (LTE).

LGE will rely on the adoption of LTE smartphones and further gains in its market share to restore profitability, but the achievement of both carries "significant execution risk", she said.

Despite some progress in the second quarter of this year, delayed launches for subsequent versions of its Optimus One model may hurt LGE's competitiveness in the third quarter and adversely impact earnings, Moody's said.

A recovery of its mobile division next year depends on the successful adoption of LTE and whether it can capture significant market share, the agency said.

"This will require aggressive action in view of the uncertainties surrounding the company's competitive positioning," it said.

Explore further: India on tap as first market for Microsoft Lumia 535

add to favorites email to friend print save as pdf

Related Stories

Moody's lowers outlook on Nokia

Oct 26, 2010

Rating agency Moody's said Tuesday it had lowered its outlook on Finnish mobile phone maker Nokia to "negative" from "stable."

LGE steps up its 3G advance on Europe

Sep 07, 2004

LG Electronics (LGE) today announced an aggressive new step in its campaign to win a significant share of Europe’s third-generation (3G) UMTS mobile handset market. Drawing on the most advanced technology in ...

LG Electronics 2Q net profit plunges, sales fall

Jul 27, 2011

(AP) -- LG Electronics, a top global manufacturer of mobile phones and flat-screen TVs, said second-quarter net profit plunged as sales declined and its mobile phone business remained in the red.

LG Electronics posts 2nd straight quarterly loss

Apr 27, 2011

(AP) -- LG Electronics reported its second straight quarterly loss, hit by investments in affiliates and falling sales, though the size of the red ink sharply narrowed amid improvement in its mobile phone ...

Recommended for you

EU Parliament votes to break up Google

3 hours ago

The European Parliament voted overwhelmingly for the break-up of Google Thursday in a largely symbolic vote that nevertheless cast another blow in the four-year standoff between Brussels and the US Internet ...

Toyota finds new air bag issue, recalls more cars

7 hours ago

Toyota Motor Corp. recalled more than 40,000 vehicles in Japan on Thursday as part of a worldwide scare over defective air bags and is investigating a new type of air bag problem that could lead to further recalls.

Netflix sues Yahoo CIO for alleged kickbacks

21 hours ago

Netflix is suing a former company vice president who is now chief information officer at Yahoo, accusing him of receiving money from vendors he hired to work with the video streaming company.

User comments : 1

Adjust slider to filter visible comments by rank

Display comments: newest first

tarheelchief
not rated yet Oct 13, 2011
I am not sure why electronic companies feel they must compete in every market. LG is doing well in many major appliances and televisions. The elusive profitability of cell phones may not exist for another competitor.
If you shift assets away from profit centers,it can be putting good money after bad.

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.