LG Electronics will spend more than half of its initial 2012 capital expenditure budget, at least $500 million, on its ailing handset business, the company said, an indication of how much the company thinks it needs to invest to catch up in smartphones.
LG set its initial capital expenditure target for next year at $1.03 billion, though LG spokeswoman Sally Lee told Dow Jones Newswires that the initial amount will likely rise substantially. LG has set a 2011 target for total capital expenditures of $4.29 billion, meaning the total investment in handsets--and likely smartphones primarily--could rise.
The announcement comes days after LG said it plans to raise $940 million via a rights offering in a bid to boost investment in its struggling handset unit and other core businesses. In a statement, LG said of that it will spend $413.5 million on research and development for its handset business to improve its competitiveness in smartphones.
LG's handset business has been in the red for the past six quarters, and its prospects did not look bright when it posted third-quarter results in October. The company has struggled to keep up with Apple (NASDAQ:AAPL) and Samsung, which became the world's largest smartphone maker in the third quarter. In LG's Mobile Communications division, LG reported a 14.9 percent quarter-over-quarter decline in sales. In the company's handset division--which sits inside of LG's Mobile Communications division--LG reported a 16 percent decline in quarter-over-quarter sales.
To counter its slide, LG said it plans to focus on shipments of newer, high-end LTE smartphones. Specifically, LG CFO David Jung promised the company would release new high-end phones in the U.S. and Japanese markets in the coming months, according to the Wall Street Journal.
- see this Dow Jones Newswires article (sub. req.)
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