LG Continues to Struggle Against Rivals in a 'Challenging' Q2

The company said it expects to "recover lost ground in the third quarter" with new products and better marketing to battle its rivals.

LG, earnings, profit and loss statement, smartphones, electronics, televisions, tablets, Apple, Samsung

Rocked by intense competition in its key markets of smartphones, televisions and home appliances, LG Electronics posted a small net profit of $206.38 million for the second quarter of 2015 ended June 30, while revenue fell to $12.69 billion, a 7.6 percent drop from the same period one year ago.

In a July 29 statement, the company said the latest financial figures are the result of "an extremely challenging environment" that combines "a sluggish global TV market and intense competitive pressures."

At the same time, though, company officials said they remain hopeful that things will turn around soon. "While the second quarter was more challenging than expected, LG is confident it can recover lost ground in the third quarter with new competitive products and more effective marketing initiatives," the company said.

LG's smartphone and mobile devices unit reported sales of $3.33 billion in the second quarter, up 1 percent from the same quarter one year ago, and smartphone shipments of 14.1 million devices, down 3 percent from one year ago.

At the same time, LG's revenue from mobile devices in North America rose by 36 percent year-over-year due to better performance of midrange smartphones and tablets, according to the company. "Although overall profitably was affected by weaker demand in the premium segment in the domestic Korean market, LG sold more than 8.1 million LTE smartphones worldwide in the quarter, its highest ever. In the third quarter and beyond, LG will more aggressively implement its dual strategy, focusing on both premium devices as well as midrange smartphones targeting emerging markets."

LG's home entertainment unit reported lower quarterly revenue of $3.59 billion "due to the weak global market for LCD TVs," but said it expects the overall market to improve in future quarters primarily in the premium 4K Ultra HD segment.

Rob Enderle, president and principal analyst of Enderle Group, said LG's second-quarter performance was bogged down by its television business in a competitive market.

"It looks like LG was hurt by TV sales and high-end smartphone sales this last quarter, mostly in Korea, showcasing a continued weakening of the Android platform against Apple," Enderle wrote in an email reply to an eWEEK query. "TVs are kind of a mess right now. The vendors have been pushing new ones on an accelerated cycle and the end result is the market is pushing back. There is a lot of hope riding on 4K TVs, but a lack of compelling programming, coupled with an installed base awash with relatively new HD TVs and early adopters who were burned by 3D TVs, is making this sales ramp particularly difficult."

In the smartphone marketplace, LG has also been having a tough time, according to Enderle. "Apple's numbers suggest that, at the high end, Apple is really the only vendor to watch," he wrote. "Both Samsung and LG have reported issues with selling high-end Android phones. The Android segment is a bit of a mess at the moment, and it appears buyers are gravitating to Apple's far simpler product line partially as a result."

Patrick Moorhead, president and principal analyst at Moor Insights & Strategy, told eWEEK in an email reply that LG needs to do better to communicate with consumers about their products, which are excellent performers in the marketplace.

"LG's biggest challenge is marketing," wrote Moorhead. "They have some of the best Android phones in the market, but they don't effectively market them in the U.S. or Western Europe. They're leaving it up to their channel partners and are not creating brand pull directly with the end consumer. LG needs to create a direct relationship with consumers, not bypass them."

In January, LG posted a $189.4 million net loss for the fourth quarter of 2014, due largely to the closure of its plasma TV operations, but still reported a $474.8 million net profit for the full year of 2014. The South Korean-based mobile device, electronics and consumer goods maker had full-year 2014 consolidated revenue of $55.91 billion, fueled largely by a 24 percent increase in smartphone shipments, according to the company.