UPDATE 2-LG Elec swings to record Q4 loss, sees rough 2009

* Posts record net loss, first loss in seven quarters

* Expects sales to decline, profits to weaken in 2009

* Mobile phone margins slump, still sees growth in 2009

* Shares down 3.7 percent; Seoul market up 1.1 percent (Adds analyst comments, updates shares)

By Rhee So-eui and Marie-France Han

SEOUL, Jan 22 (Reuters) - South Korean mobile phone and appliance maker LG Electronics Inc (066570.KS) posted a record quarterly net loss, hit by big shortfalls at its flat-screen affiliate and weak mobile phones.

LG had no better news for the 2009 outlook, saying its sales should decline and profits worsen this year due to slumping demand and increasing competition, sending its shares down almost 4 percent.

LG, now the world's No.3 handset maker, will likely have to sell more lower-priced models as it fights rivals to tap remaining buyers amid a worldwide downturn.

After posting its first loss in seven quarters, LG is expected to swing back to profit in the current quarter thanks to strong seasonal appliance sales, but analysts fear the recovery could be limited on anaemic consumer demand.

Its ambitious push in flat-screen TVs could also make it vulnerable to a price war and eat away at profits, they say.

"The 2009 mobile market is expected to be a lot worse than 2008 in terms of sales and revenue," said Lee Sung-joon, an analyst at SK Securities.

"LG's earnings could recover in the first quarter, considering seasonal demand, but because of the global economic slowdown, it won't be that much better than the fourth quarter."

LG reported a 671.3 billion won ($489.7 million) net loss for October-December, much worse than a consensus forecast for a 172.3 billion won net loss from eight analysts polled by Reuters.

Worse-than-expected results last week at its LG Display Co Ltd (034220.KS) LCD venture and currency-related losses also dented LG earnings [ID:nSEO158794].

The loss compares with a net profit of 621.3 billion won a year ago and 24.9 billion won in the third quarter.

LG shares slid after the results, ending 3.7 percent lower against the KOSPI's 1.1 percent gain.