Increased marketing cost pushes LG handset unit into the red – Mobile World Live

Increased marketing cost pushes LG handset unit into the red

25 JUL 2012

LG Electronics announced a second quarter operating loss for its handset business, noting that it had “struggled somewhat” due to increased marketing expenses to support new handset launches during the period.

The South Korea-based company said that “although cost structure improved due to better product mix from stronger LTE phone sales, operating profit declined as a result of increased marketing expense”.

The company also saw another decrease in its shipment volumes, falling to 13.1 million units during the quarter.

For the three months, the handset business recorded an operating loss of KRW59 billion (US$51.3 million), compared with a loss of KRW55 million in the second quarter of 2011, on revenue of KRW2.29 trillion, down 28.6 percent from KRW3.2 trillion.

The company noted “shrinking feature phone sales,” but said that smartphone shipments rose to make up 44 percent of the total, up from 36 percent in the prior sequential quarter.

The news comes after two profitable quarters for this unit, following a long period of operating losses. It has also seen its revenue pressured over the most recent periods.

Looking forward, the company said that in the third quarter it expects competition to intensify, “with competitors launching premium flagship models”. It said it plans to launch new LTE models in developed markets, and increase revenue with “marketing efforts and efficient supply chain management”.

The operating loss for LG’s Mobile Communications unit as a whole was KRW57 billion, compared with KRW54 billion in Q2 2011, on sales of KRW2.32 trillion, down from KRW3.25 trillion.

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