South Korea's LG Electronics ousted its chief executive today, replacing him with a founding family member in a bid to turn around its loss-making mobile phone business, the world's third largest.
Koo Bon-joon, the head of trading firm LG International will take over from Nam Yong, who resigned from the top job to take responsibility for poor management, LG said today.
Mr Nam is the second chief executive of a major mobile phone maker in a week to lose his job after Nokia replaced Olli-Pekka Kallasvuo with Stephen Elop, a Canadian Microsoft executive.
Both LG Electronics and Nokia have been under pressure due to a lack of strong smartphone models to rival Apple's iPhone and Samsung Electronics Galaxy S. LG's mobile business reported a record loss last quarter and warned of a similar loss this quarter.
Investors welcomed the sudden change and pushed LG Electronics shares up nearly 6 per cent. The shares closed up 4.7 per cent, their biggest percentage gain in about six months.
"Koo is expected to reshuffle the organisation and actively cope with the fast-changing IT industry... LG is expected to narrow the gap with Apple and other leading smartphone markers," said Lee Yong-jik, a fund manager at AIG Investments in Seoul.
The changes at LG and Nokia underscore the turmoil that global handset vendors are embracing due to their slow reaction to the booming smartphone market, which Apple jump-started with the launch of its iPhone in 2007.
LG has failed to come up with a hit model to compete against Apple's iPhone or Android phones made by Samsung Electronics, Taiwan's HTC and Motorola and its models so far have been too weak to cover overhead costs.
Its mobile unit, once accounted for about a third of the group sales, earned one fourth of second quarter revenue and reported a record loss of 120 billion won (€78 million).
Management changes are usually made at the end of the year but the move, which takes effect from October 1st, reflected an urgency to overhaul the struggling mobile unit.
"We made the decision to give an incoming chief executive enough time to prepare for next year," LG said in a statement.
The 58-year-old Mr Koo is a younger brother of LG Group chairman Koo Bon-moo. A graduate of South Korea's Seoul National University, and the University of Chicago's business school, Mr Koo has spent most of his career at his family's business group after a stint at US telecoms firm AT&aT.
LG unveiled the new Optimus One this week and said it was targetting sales of 10 million units for its first smartphone to be launched globally through some 120 carriers. None of the company's smartphones have yet hit the 1 million unit sales mark.
LG hopes the new Optimus One, along with a new line-up powered by Microsoft's Windows Phone in the fourth quarter, will would revive its reputation.
Reuters