China's TCL Corp sees profits in Q1

By Doug Young

HONG KONG (Reuters) - TCL Corp. (000100.SZ: Quote, Profile, Research, Stock Buzz), the world's biggest television maker, expects to return to profitability this quarter as it focuses on improving recently acquired overseas operations, its chairman said on Wednesday.

"Starting from the first quarter we expect to be profitable," said TCL Chairman Li Dongsheng at the Reuters Global Technology, Media and Telecoms Summit. Li also heads Hong Kong-listed TV maker TCL Multimedia (1070.HK: Quote, Profile, Research, Stock Buzz) and cellphone maker TCL Communication (2618.HK: Quote, Profile, Research, Stock Buzz).

TCL became the world's largest TV maker in 2004 when its TCL Multimedia pooled its profitable TV-making operations in China with the loss-making TV operations of France's Thomson (TMS.PA: Quote, Profile, Research, Stock Buzz) in a TCL-controlled joint venture.

But its plans to turn the Thomson operations around have not materialized as quickly as hoped, particularly in Europe.

Li said the company is targeting relatively flat sales for its TV arm this year, with 23 million units planned for 2006 compared with 22.6 million a year earlier.

He said the company's North American operations -- which posted a loss of about $30 million last year -- are expected to break even this year, with 3.3 million units in sales and revenue of $850 million, about the same as in 2005.

He would not comment on the European operations, which also lost $30 million last year, but said the company is working to improve the operation.

Last month, TCL Multimedia said it expected to post a net loss in the fourth quarter due to tough market conditions in Europe.

"This year our goal is to raise our competitiveness, to raise the quality of our operations rather than our overall scale and sales volume," Li said in Hong Kong.

STRUGGLING LINES

TCL has struggled for much of the last year in both of its two major product lines, cellphones and TVs.

TCL saw the Thomson TV joint venture as a means to quickly expand beyond its China home base, banking on Thomson's RCA brand to gain a footing in North America and its Thomson brand in Europe.

TCL's other major business, cellphones, has also limped along both in the domestic and foreign markets.

Its domestic business has been hit by renewed drives in China from global giants Motorola (MOT.N: Quote, Profile, Research, Stock Buzz) and Nokia (NOK1V.HE: Quote, Profile, Research, Stock Buzz) at the low end of the market, an area once dominated by TCL and other home-grown Chinese cellphone makers.

TCL's cellphone sales plunged 75 percent in January, amid stiff competition in the market.  Continued...