LG's mobile division posts loss on declining sales
updated 07:57 pm EDT, Wed July 25, 2012
Mobile sales down due to marketing
South Korean electronics manufacturer LG reported earnings for the most recently ended quarter today, revealing a 10 percent sales drop that spurred a subsequent decline in its share price. According to The Financial Times, LG's mobile division suffered the most in the quarter, continuing the poor performance that has characterized the division for much of the past several quarters. Other divisions also saw losses, but the company believes that its current efforts, in addition to positive signs from developing markets, will improve its outlook in the near future.
Before taxes, LG posted a $205 million profit for the period, up from $130 for the same quarter of last year. In all, the company posted a net profit of $138 million for the quarter, up 46 percent year-over-year. Total revenues for the period amounted to $11.2 billion, down 11 percent.
The mobile division, however, saw revenues decline 28.6 percent year-over-year, for an operating loss of $49.5 million. That loss marked the fifth for the mobile division in the last seven quarters.
LG attributes the loss in the mobile division largely to its marketing efforts. The company has recently increased its focus on smartphones and is preparing for a big marketing push featuring new devices in an effort to improve its standing in the sector. LG does, though, expect that its sales will be affected by the expected launch of a new iPhone and, consequently, has declined to estimate when the mobile division will return to profitability.
The company's home entertainment arm saw sales drop six percent to $4.8 billion. That division saw improved margins, though, so its operating profit more than doubled to $188 million over the quarter. The home entertainment division is doing particularly well in developing markets, and LG expects that that trend will cancel out falling sales, resulting in overall revenue growth.
Shares in LG have shed 52 percent of their value since the beginning of 2011 as the manufacturer struggles to remain relevant in the competitive mobile sector. On the day, shares closed down two percent.
