July 22, 2004 2:42 PM PDT
LCD maker stumbles in stock market debut
Stock in the company, a joint venture between LG Electronics and Royal Philips Electronics, dropped about one dollar from its initial public offering price of $15 on the New York Stock Exchange. The South Korea-based manufacturer has been switching the top spot in the LCD market with Samsung Electronics but is currently ranked No. 2.
The dip in share price is an indication of a gradual decline in fortunes for the flat-panel market, analysts said.
"LCD prices are coming down on all sizes, and that has a reflection on margins," iSuppli senior analyst Vinita Jakhanwal said. "Because of that, the market seems to be discounting LG.Philips LCD."
LG.Philips LCD makes sheets of LCD panels that are cut into smaller displays for use in a wide range of products, such as televisions, desktop monitors and notebook computers.
Analysts attribute the volatile nature of the flat-panel market to growing pains. After a promising year of growth in revenue and units shipped, the market slowed down. Lower-than-expected shipments and the opening of plants with greater production facilities meant that the market was flooded with panels. As fewer plants open and players consolidate or leave the market, less drastic fluctuations in shipments are expected.
Through a global share launch in New York and Seoul, South Korea, LG.Philips LCD aimed to raise about $2 billion, but it had to lower its aim and raised about $1 billion. Its IPO price of $15 per share was at the low end of its range of $15 to $18.
LG.Philips said it will use proceeds from its stock market launch to build a fabrication plant, which will be equipped to produce the large panels used in LCD televisions, which have higher margins than desktop monitors. Rival Samsung has teamed with Sony to form joint venture S-LCD, a similarly equipped LCD plant.
Despite the slowdown, analysts expect sales of LCD panels to continue to grow. Last year, the market recorded worldwide revenue of $35.7 billion, according to research firm iSuppli. Still higher revenue is expected this year--$47 billion, an increase of 32 percent from last year.