May 26, 2008 / 9:58 AM / in 9 years

LG Elec says "carefully watching" Nokia

SEOUL (Reuters) - LG Electronics is keeping a close eye on potential moves by top handset maker Nokia but is generally positive about the industry’s environment this year, an executive said on Monday.

“We are carefully watching Nokia,” Chang Ma, LG’s vice president for marketing strategy told Reuters in an interview.

Shares in LG Electronics tumbled more than 8 percent on market talk that world No.1 mobile phone maker Nokia may cut its handset prices and re-enter South Korea in the second half of this year.

Shares in No.4 handset maker LG closed down 3.8 percent at 140,500 won after touching 130,500 won. Shares of bigger home rival Samsung Electronics, the world’s No. 2 maker, closed down 3.96 percent at 679,000 won, underperforming a 1.5 percent fall in the wider market.

Ma said LG was also looking to seize any opportunities coming from the difficulties experienced at world No. 3 Motorola Inc and No. 5 Swedish-Japanese Sony Ericsson

While the company has not revised its yearly shipment target of 100 million units, Ma said his outlook for the rest of the year was positive.

“We see some risks coming from the economic slowdown, the rise of raw materials prices and the possibility of unexpected moves by competitors, but we will compensate these risk factors with our product portfolio and our marketing strength,” Ma said.

LG sold a record 24.4 million phones in the traditionally weak first quarter and looks well on its way to pass its previously stated target of 100 million phones for the year.

First-quarter operating profit margin on handsets was 15.9 percent on a parent basis, almost double the previous quarter’s 8.3 percent and against 6.6 percent a year earlier.

Ma said he expected the handset division to post a “double digit” operating profit margin in the second quarter.

Thanks in part to stellar results in its handset division, LG is expected to post a net profit of 2.5 trillion won for 2008, more than double 2007’s 1.2 trillion won profit, according to Reuters Estimates.

Motorola has been losing market share to rivals while Sony Ericsson has said demand for the high end had softened.

Reporting by Marie-France Han; Editing by Keiron Henderson

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