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No hope for LG or HTC

LG HTC Smartphones Sales

The shockingly weak sales of LG’s flagship G2 smartphone have wider industry implications. The company moved only 2.3 million units of its flagship model during its launch quarter, missing its already lowballed 3 million unit target by more than 20%. The context here is that Samsung shipped 10 million units of its latest Galaxy S model in just one month, vaulting to 20 million units in two months. Samsung is now in the position where it is outselling what was once its close rival by more than 10 to one during their respective flagship smartphone launch quarters.

What makes LG’s fumble so scary is the fact that it is reported to have spent 200 billion won on marketing its mobile products in the G2’s launch quarter. This shows that even a strongly reviewed, abundantly marketed high-end model from one of the strongest second-tier phone brands in the world can not compete against the Sampple duopoly.

After the massive failures of HTC and LG’s most recent high-end devices we now know that doing a huge, but not gigantic advertising push is not enough. These companies cannot afford Samsung-sized marketing spends. The only possible route to viability in the non-Sampple market now lies in the aggressive low-end strategy, which Nokia/Microsoft is now trying to execute. That requires a long period — possibly years — of selling budget phones at a loss until a volume base sufficient for profitability is reached. Which in turn requires piles of money of Microsoft magnitude to work… if it ever will work.

It now looks as though LG and HTC have nowhere to turn — there is no way out of the box they now find themselves in.

After launching mobile game company SpringToys tragically early in 2000, Tero Kuittinen spent eight years doing equity research at firms including Alliance Capital and Opstock. He is currently an analyst and VP of North American sales at mobile diagnostics and expense management Alekstra, and has contributed to, Forbes and Business 2.0 Magazine in addition to BGR.