The world’s third biggest manufacture of mobile phones and flat screen TVs, LG Electronics must be back to the drawing table given its declining profits and sales. With its place as the third biggest manufacture of handsets, one would expect the company to report impressive earnings as it stakes out its claim of the smart phone market that is currently riding high in the handsets business.
Cell Phones Lacklustre Performance
However, it appears cell phones are behind LG’s poor performance as their sales have hit a slump resulting in losses and low sales for the phone giant. During its recent quarterly report release, LG Electronics revealed that it had suffered a 33% decline in its second quarter profits, a fact that it attributed to losses in its cell phone business. The South Korean cell phone manufacture posted earnings of 722.4 million US dollars; which marked a decline from 2009’s staggering 1.28 trillion South Korean won, about over 1 billion US dollars. As such, the company reported that it had operating losses of 120 billion South Korean won, about 101.2 million US dollars that it attributes to have been a result of price competition and marketing, research and development costs.
Subsequently, the global leading manufacturer of consumer electronics and home appliances said it profits had fallen by one third due falling sales and operating losses from its mobile phones unit. On the average thus, sales reported in the second quarter declined by around 0.7% to 14.4 trillion South Korean won from their previous mark at 14.5 trillion won. However, the company was positive regardless reporting that even despite the falling mobile phones sales, it had experienced a growth in mobile phone sales in emerging markets, increasing by a reported 2% to about 30.6 million units. Additionally, the emerging markets are typically showing sustained growth and responding positively, albeit slowly to the company’s smart phones such as the LG Ally and the Optimus Q.
Resultant Operating Losses
But even so, the company’s revenues from handsets sales were on the declining, with a reported 31% fall in sales to about 3.37 trillion South Korean won, representing the massive 120 billion won in operating losses for the gadgets LG experienced. The company’s absolute operating profit, taken as a measure of its business performance minus taxes, dividends, asset sales amongst other factors tabulated into net profit or loss dipped by a staggering 90% to about 126 billion won. This had in 2009 peaked at an impressive 1.24 trillion won, what a loss!!
The fact that LG Electronics comes third after Samsung and Sony Corp in terms of flat screen TVs market share and only third to Nokia and Samsung in terms of the mobile phones market seems not to be working for the firm, rather comes as one of its weakest spots if it cannot compete against other majors in the phones business. However, let’s hope its expected moderate growth in the third quarter as the global economy recovers will come with its won blessings for the company.