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LG gets boost from latest smartphone G3

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Published : 2014-05-30 15:09
Updated : 2014-05-30 15:09

South Korea's LG Electronics Inc. traded near this year's high on Friday on hopes that its latest high-end smartphone, the G3, would help pull its money-losing handset business out of the red.


Shares of LG Electronics closed at 72,900 won on the Seoul bourse, down 1.62 percent from this year's high of 74,100 won, after hitting an intra-day high of 74,800 won at one point.


For the past four sessions, its stock price has gained more than 6 percent as foreign and institutional investors scooped up the tech giant.


On Wednesday, LG Electronics unveiled the G3, a revamped version of its predecessor, the G2, to take on Samsung Electronics Co.'s Galaxy S5 and Apple Inc.'s next high-end smartphone, the iPhone 6, rumored to be unveiled in August.


Among other specifications, the new device with a 5.5-inch screen has a screen quality four times that of standard high-definition resolution, and also features a laser focus for the camera. Also, LG Electronics lowered the price tag for its flagship model to 899,800 won in South Korea, some 6 percent lower than its predecessor, in order to woo more customers.


"In terms of specifications and capabilities, the G3 is superior to the Galaxy S5 and the iPhone 5S, and its design and camera are better than expected," said Kim Ji-san, an analyst at Kiwoom Securities. "The device will help LG's handset business turnaround starting from the second quarter."


LG said it would ship more than 10 million units through some 170 carriers around the globe. Although LG did not provide exact shipment figures for the G2, market experts estimate some 5 million units have been sold since its debut in August. 


LG's mobile business has been stagnant as marketing costs increased amid intensified rivalry in the industry. Its mobile division posted an operating loss of 43.4 billion won in the fourth quarter of 2013. But its handset business division's operating loss narrowed to 9 billion won in the January-March quarter.


"Its handset division's performance is key to LG's stock prices...  shipment of the G3 will increase and its marketing costs are expected to decline as well," said Kim Hae-yong, an analyst at Woori Investment & Securities. The analyst raised a target price for LG Electronics by 13 percent to 95,000 won.


But some analysts point out that LG Electronics faces harsher competition from its rivals, such as Apple and Samsung. Samsung may ramp up marketing for its new flagship, the Galaxy S5, and cut its price.


In emerging markets, LG would have to overcome uphill battles with Chinese rivals such as Lenovo Group, and the launch of the new smartphone could also lead to a rise in marketing costs, which in turn eat into LG's bottom line.


"The G3 proves LG's prowess, but a growing competition in the smartphone market does not bode well for LG," said Lee Seung-hyuck, an analyst at Korea Investment & Securities. (Yonhap)

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