LG on the whole has been riding high in 2018. But that’s no thanks to its serially struggling mobile business.
Everyone has basically been writing the same version of this story for a while now. The electronics giant releases earnings that show the company doing well — and that it would be doing even better if it didn’t have a mobile division at all. The division, which recently pinned its hopes on sales of the five-camera V40 ThinQ flagship, has lost more than $400 million this year. Not that it’s alone in the struggle, of course, as other handset makers including Sony and HTC are also likewise financially floundering a bit in their mobile efforts.
LG’s mobile division, meanwhile, hasn’t turned a profit for several quarters now, a trend that continued in the third quarter of this year, according to the company’s just-released financials. LG blamed the performance in part on increased competition and “weakening demand for smartphones worldwide” — which the company also blamed during the prior quarter. Nevertheless, LG said it has been successful in significantly cutting its operating deficit in the division partly as a result of giving a stronger focus to mid-range products. It’s also hoping sales of the V40 ThinQ boost sales in the fourth quarter.
TechCrunch reports that “following a record six months of profit and revenue in the first half of 2018, the group saw Q3 revenue jump 2.7 percent sequentially to reach 15.43 trillion KRW, or $13.76 billion. Operating profit rose by 45 percent year-on-year to reach 748.8 billion KRW, that’s $667.7 million.
“The company’s home entertainment business is the standout performer generating total sales of 3.71 trillion RKW ($3.31 billion) and a 325.1 billion KRW ($289.9 million) profit, with LG Mobile second in terms of revenue. But, the mobile division continues to bleed cash. This time around in Q3, its losses were 146.3 billion RKW, that’s $130.5 million.”
As a reminder, the company announced a shake-up in its mobile division almost a full year ago, bringing in a crop of new executives as part of what LG touted as a “sweeping realignment to better address the challenges ahead.” Since then, the company has still struggled to figure out how the brand can stand out in the Samsung- and Apple-dominated smartphone world.
LG believes part of its value proposition is in offering consumers strong value for money, especially those who are hunting for a deal, the TechCrunch piece continues. “That explains why mobile division sales are down this year but, crucially, the division is bleeding less capital. (While) that strategy has helped stem losses, it remains to be seen whether it is the right one to turn the unit profitable.”