LG cited “an extremely challenging environment” for premium smartphones as the reason for posting a net operating profit of just 200M won ($172k) for its mobile division – a number put into stark perspective by Engadget as a profit of just 1.2 cents per phone. LG specifically singled out competition from the iPhone as a factor.
While year-on-year smartphone shipments were down 3%, it did achieve a tiny 1% increase in revenue, but said that profitability was hit by weaker demand in the premium sector in its home market of Korea. There was better news in the U.S. and Canada, however …
LG reported a 36% increase in North American mobile revenues, which it attributed to increased sales of mid-range devices. The company says that it will aggressively pursue its twin-pronged focus on both premium and mid-range models, but investors and analysts alike seem unconvinced. The WSJ reports that the company’s share price last week dropped to a 12-year low, and analysts believe LG faces continued tough times ahead.
“The continued slump in LG’s stock prices is because there is no way of telling when the earnings decline will come to a stop,” Kim Hyun-yong, an analyst with eBest Investment Securities in Seoul, wrote in a recent research note. “It’s hard to find grounds to believe that the business environment will improve next year compared to this year.”
The company as a whole remained profitable due primarily to the strong performance of its home appliances division. In mobile, the company is being squeezed by Apple at the top-end and Chinese brands in the mid-range.
Our own review of the LG G4 found it to be an excellent smartphone, with a better camera than rival flagship phones, but lost out due to hitting the market late in the year.