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Day August 26, 2011

Is LG about to exit the phone market?

LG’s market position seems precarious. I first noted LG’s predicament about a year ago: LG dreams of smartphones [Updated] | asymco

LG lost profitability in Q3 2009 and has not recovered it yet nor can it say when it might.

In a recent article on analyst reactions the prospect of LG’s exit from handset sales is raised:

LG’s handset division is the company’s biggest capital sinkhole and the shares have more than halved this year, making it the worst performer even when compared to HTC and Nokia.

“Selling the loss-making business is probably what investors want,” said Harrison Cho, an analyst at KB Investment & Securities. “But even with that option, LG wouldn’t get much from the sale. They should have sold it long ago before the overall landscape got tougher.”

“They simply missed the boat,” said Cho.

The dire business outlook had already pushed LG shares below their book value to a record-low multiple of 0.9 times its book value, much cheaper than Research In Motion’s 1.6 times, Nokia’s 1.1 and HTC’s 8.2.

That’s a huge discount for a company that is also a global brand in television and home appliances.

Analysis: LG faces tough choices for mobile phone division – Yahoo! Finance