Handset Competition Badly Affected LG Electronics' Third Quarter’s Profit
In its Thursday announcement, LG Electronics reported that its net income for third-quarter dropped by 34 percent. The reasons for the drop were price cuts as well as marketing costs of the launch of the LG’s newest flagship handset.
The South Korean giant electronics manufacturer reported that its this years’ third quarter net income was $103 million or 108.5 billion won. Last year’s third quarter net profit was $147.7 million or 156 billion won.
The LG’s mobile communications recorded the loss in the last quarter although it sold 12 million smartphones for the quarter. The loss, the first in five months, was 79.7 billion won or $75.5 millionm, on the reported sales of 3.05 billion won or $288.8 million. The company had high hopes for its 5.2-inch G2 smartphone launched in August, expecting it to bring the much needed boost. Unfortunately, the smartphone’s profitability was seriously affected by the increased marketing costs for its promotion, as well as increased pressure from the competition. LG was forced to cut prices due to the competition from Apple and Samsung.
During the same period, the LG’s division for home-entertainment reported operating profit of 124.4 billion won ($117.8 million), in spite of the global decline of demand for TVs.
In total, LG reported that its quarterly sales were showing an increase of five percents in the last three years. Only during the last quarter the company experienced the overall decline in profits of 8.8 percents. Operating profit went up by 27 percent, to $196.34 million or 217.8 billion won.
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