LG Posts Profit But Mobile Division Disappoints

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LG Posts Profit But Mobile Division Disappoints

The Korean electronics giant LG, posted today net profit of 159 billion Korean won, or $138 million against 109 billion Korean won, or $94 million a year ago. However the revenue declined 10.6 percent to 12.86 trillion Korean won, or $11.18 billion. Quarterly income was up nearly 50 percent from a year earlier, but fell 35 percent from the previous three months.

LG’s mobile division was disappointing with 28.6 percent decline in sales on yearly basis, after enjoying two consecutive quarters of profit. LG’s mobile division lost the nearly 1 trillion gained in 2010 and 2011 combined, as its Optimus smartphone series failed to compete with Samsung’s (LSE:SMSD) Galaxy phone and Apple Inc. (NASDAQ:AAPL)’s iPhone.

The company also noticed decline in sales of its home entertainment business, but company’s profit in the area more than doubled, thanks to premium products, cost cuts, and a more efficient supply chain. LG ELECTRONICS NEW (PINK:LGEAF) also reported stronger sales of its LED and 3D television sets. Even its home appliance business saw operating profit nearly tripled with small gain in sales. Such outcome was the result of an improved mix of higher end products and lower costs.

The electronic conglomerate was overtaken by Apple Inc. in 2011 as the world’s No. 3 mobile phone maker by sales. LG like many other handset maker such as Nokia Corporation (NYSE:NOK), Research In Motion Limited (NASDAQ:RIMM), and Google’s Inc (NASDAQ:GOOG) own Motorola Mobility, continues to struggle with the segment with almost nil progess on global market share. Even in the US markets, LG Viper and LG Nitro HD phones did not even get the due attention from the consumers. LG’s mobile division is getting fierce competition in both the premium and low-end markets. Chinese handset makers ZTEST Electronics Inc. (CVE:ZTE) and Huawei are aggressively increasing low-cost Smartphone sales while Apple and Samsung Electronics Co. are leading in the top-end market.

LG blamed the sluggish sales of its basic flip and messaging phones for the poor performance. LG reports that the sales of its smartphones saw improvement, therefore to cash in more LG plans to focus its resources on more LTE smartphones. Also to stay fit the Korean company plans to spend more on its marketing effort and streamline its supply chain

However, LG is optimistic about its mobile division for the rest of the year, with new high-end mobile device launches due in North America and Japan. Also the company plans expand its mobile market share with its Android-powered smartphones running on a fourth-generation wireless service.

LG forecasts its third-quarter operating profit will slightly decrease from the second quarter, even as sales go up by a small margin.

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