- Goldman Sachs notes that based on their recent channel checks, they believe LG Electronics' handset business is tracking ahead of expectation, but handset upside could be offset by the weaker-than-expected display business. Appliance remains on track.
Firm expects LGE to ship 16.3 mn handsets in 1Q (vs. 15.5 mn guidance). 'Chocolate' shipments remain strong, and the recently launched 'Shine' phone seems to be off to a strong start. Overall, handset profitability could see a modest improvement in 1Q to around 3% OPM, helped by 1) higher volume, 2) favorable product mix, and 3) FX.
Display remains the weak link, and they expect losses to widen in 1Q. PDP is the main culprit, suffering from low utilization and ASP declines. In addition, LCD TV prices for new models were recently lowered, while LCD TV panel prices have fallen less than expected, further pressuring TV margins.
GSCO is encouraged by the signs of improving execution in LGE's handset business. 1Q could mark the third quarter of stable handset margins (albeit a low margin), and be a step closer to regaining investor confidence.
Notablecalls: There aren't many positive signals coming from the handset industry but looks like GSCO managed to spot one. The Chocolate is a chic phone and that pretty much tells me consumers are willing to buy new handsets, provided they are new & cool. That's what Motorola (NYSE:MOT) is currently lacking. However, given the low valuation and pessimistic sentiment, an opportunity for a leap of faith may be in the cards here. Not a high conviction call here but I thought to express my view on this one. See archives for more color on MOT.
Firm expects LGE to ship 16.3 mn handsets in 1Q (vs. 15.5 mn guidance). 'Chocolate' shipments remain strong, and the recently launched 'Shine' phone seems to be off to a strong start. Overall, handset profitability could see a modest improvement in 1Q to around 3% OPM, helped by 1) higher volume, 2) favorable product mix, and 3) FX.
Display remains the weak link, and they expect losses to widen in 1Q. PDP is the main culprit, suffering from low utilization and ASP declines. In addition, LCD TV prices for new models were recently lowered, while LCD TV panel prices have fallen less than expected, further pressuring TV margins.
GSCO is encouraged by the signs of improving execution in LGE's handset business. 1Q could mark the third quarter of stable handset margins (albeit a low margin), and be a step closer to regaining investor confidence.
Notablecalls: There aren't many positive signals coming from the handset industry but looks like GSCO managed to spot one. The Chocolate is a chic phone and that pretty much tells me consumers are willing to buy new handsets, provided they are new & cool. That's what Motorola (NYSE:MOT) is currently lacking. However, given the low valuation and pessimistic sentiment, an opportunity for a leap of faith may be in the cards here. Not a high conviction call here but I thought to express my view on this one. See archives for more color on MOT.
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