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« Apple Q2 Results. Signs now DO indicate that we have passed 'Peak iPhone' | Main | Bloodbath Q2: Sony results, NEC news, Apple and Samsung surprise »

July 25, 2013

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AndThisWillBeToo

LG financials show their profit margin got slimmer as they increased their marketing budget more than their gained sales increase came to be.
So questions I would ask are:
-Where would they be without advertisement push?
-Will it last?
Samsung is known to have bigger marketing budget (sakes reps bonuses included) than any other player in the field. And this is per handset sold, not as a whole. Obviously marketing is the key to sakes but as LG does not compete Samsung in price nor quality, can they keep it up?

jj

Android is way to go for LG. Windws Phone is not an option (lacking features in highend side and too expensive for budget phones).
(I'd like to get a t-shirt: Fire Elop Now!)

E.Casais

What kind of real strength does LG have to secure a good place in the Android food chain?

Samsung has diversity and access to all components it needs (it manufactures them). Sony has assets in photography and gaming. Huawei is cheap.

HTC did not have any dominant card to play, apart from fast releases of cool-looking phones -- whose reputation for quality has been more on the low side ever since it produced Windows Mobile PDAs, with a series of overheating Android smartphones. It is currently fighting hard not to sink. We know what happened to Motorola, which did not have any USP for its Android devices.

So what could LG capitalize upon to keep a top-spot/3rd place in the competition?

Winter

IDC numbers:

Growth Accelerates in the Worldwide Mobile Phone and Smartphone Markets in the Second Quarter, According to IDC
http://www.idc.com/getdoc.jsp?containerId=prUS24239313

darwinphish

If I read the press release correctly, LG's ARPU is under $230 and their average profit per device was about $4.50. I don't think 2% margins are anything to get excited about.

John Phamlore

I think whatever success LG has is more the triumph of Korean industrial policy where their chaebols have enough breadth in what they do to recover from temporary problems, as long as they keep investing in key technologies. Korea had the sense to not just bet it all on Samsung but to also have LG as a backup.

Korean industrial policy is superior sometimes to that of say the United States where the number of players can diminish to zero and is superior sometimes to that of say France where the number of national champions is maybe one.

John Phamlore

@E.Casais,

LG is apparently working with GCT Semiconductor for its own LTE-chipset:

http://www.gctsemi.com/html/news/pr062711.html

As I have been trying to explain with limited success here, the stakes as far as LTE goes are far higher than who sells more phones. If one looks at GCT's other information on their site, one sees they are trying to sell not just to phone makers but to telecom infrastructure providers. After all, the chips have to talk to each other wirelessly at some point, and thus they have to be made interoperable.

Huawei's angle is not cheap. They've basically given up selling handsets or much of anything else in the US. Huawei's play as one can read from their site is to provide a one-stop shop for the entire chain, to provide interoperability with legacy earlier generations, and to optimize the very scarce and conflicting use spectrum.

E.Casais

@John Phamlore

Controlling the RF technology is crucial for anyone in mobile. It was (and still largely is) the core competence of firms such as Ericsson, Qualcomm, Nokia. It is a necessary, but not sufficient condition, to be a major player in mobile devices.

The point is: just like Samsung, LG has several legs to stand on -- displays, storage, silicon. But contrarily to Samsung, it has had great pains to take off in the smartphone business. The question is why? What is missing?

winter

@Snarky
You are adverticing some click trap

AndThisWillBeToo

@Snarky
Isn't this second time in a short while that link gets pasted here?
Hope you switched IP too, not just nick.

Sander van der Wal

@Snarky

Old news. The site has been shut down for a couple of months.

chithanh

@Snarky
There is even a website where Nokia provides training to their employees to become guerrilla marketers and form the "Nokia Army". Eldar Murtazin wrote about it here:
http://www.mobile-review.com/articles/2012/birulki-160-en.shtml

That dominiescommunicate site is way too unprofessional to be run by Microsoft. Microsoft does not employ amateurs.

AndThisWillBeToo

@CN
About Finns and honesty. Tomi has acknowledged that same thing:
"Now its the ultimate game of hype and spin-the-story. And Nokia was Finnish to a fault, being the 'stick to the truth' very honest and open story, any problems too, bring them into the open and volunteer as much truth as possible. This had been a good strategy back in the Era Before the iPhone - when the rivals were other very engineering oriented, facts oriented rivals like Motorola, SonyEricsson, Samsung etc. Now there was a new kid who seemed to play 'unfair' and start to distort the market opinion with all sorts of bizarre claims and facts and 'innovations' which certainly were not invented by Apple and often were simply established industry standards."
http://communities-dominate.blogs.com/brands/2010/07/obituary-for-opk-wall-street-is-a-cruel-mistress-nokia-searching-for-ceo.html

Somehow he forgets that "Finnish to a fault, being the 'stick to the truth' very honest and open story" when it is time to bash Elop. ;)

Tomi T Ahonen

Hi all,

Great comments, please keep them coming.

On LG's very slim profit level today. That is a good point, but remember, for many quarters in a row they were doing losses with their handset unit. They had to stabilize that first. Once they were back to profits, they can start to grow again in a healthy business. Is the profit level 'good enough' - no. But the trend is strong now, from past loss-making to modest profits and unit growth and market share growth. The signs are good, now they need to just continue on that path.

Tomi Ahonen :-)

Tomi T Ahonen

Hey CN

One silly comment at the end of a very good posting and your whole comment got deleted. You know why. Why bother with that? Stick to the point (and the truth) and you'll be fine. The moment you do that silly stuff, you get deleted.. feel free to continue this silly process, your time wasted is far more than the one click it takes me to delete inappropriate comments.

Tomi Ahonen :-)

oli

another silly deletion

St0815

It's not just LG which is doing well with Android. ZTE and Lenovo have positive results, too. Even Sony is gaining back some market share.

These companies have proven that it's possible to compete using Android. That doesn't mean they'll ultimately be successful, but they have a chance.

What exactly is Nokia doing wrong, that makes their smart phones so unpopular, if the problem is not Windows? What's wrong with their phones then?

So Vatar

@ St0815:

Maybe Nokia's problem IS Windows and Microsoft? When I read the article referred to below I had a good laugh. Now Nokia themselves say there is something wrong in their relationship with MS. Begs the question (asked one thousand times here and elsewhere) why in hell did Nokia decide to go with Windows phone exclusively? Why oh why....


http://wallstcheatsheet.com/stocks/nokia-to-microsoft-youre-too-slow-for-us.html/2/

"The International Business Times pointed out that Nokia is much more invested in the Windows Phone’s success than Microsoft is, which is part of the problem for phone maker. Microsoft has its Office software, Xbox game console, and Surface tablet-laptop hybrids to worry about, and those projects are a higher priority for the company than the Windows Phone operating system.

Biniak said Nokia would continue to work on improving the Windows Phone, even if the project is not Microsoft’s top priority: “As a company we don’t want to rely on somebody else and sit and wait for them to get it right.”

Tester

That last statement can also be seen as a very thinly veiled threat: 'If you don't start delivering, we may dump your OS.'

Now things really get interesting...

So Vatar

I have been waiting for Nokia to dump WP for quite a while. I believe dumping WP would mean also dumping THT Flop.

I am just not sure if the current Nokia has enough resources left to switch to an alternative OS and be competitive. Years of Elop's reign has taken a huge toll. Remember, plan B was to make plan A successful in case plan A fails. Now plan A and plan B are proven failures. What's left?

A frank assessment of Nokia's capabilities shows that they still have huge problems in execution, so Flop did not improve there. The real change I see him making was exchanging a sound strategy which had a fighting chance (Mameo/Meego and phasing out Symbian using Qt as the glue to hold it together) with an all or nothing one (WP and WP only). Now they seem to realize what it means to be dependent on a "partner" like MS, having no OS talent left within their own firm.

At this point the diagnosis of the problem is clear and apparent, the cure not so much.
Going Android (established competition), buying Jolla (they seem to be delayed too), joining one of the other OS'es out there (anyone of these will be significant???)?
And going alone? I fear that train left the station in Feb 2011 ("Burning Platform" a.k.a. "Our products are obsolete, buy something else...").

John Phamlore

LG could have sold a lot more phones a couple of quarters ago, with the Nexus 4 sold out almost immediately. How much of the increase in LG's sales is due to supply finally catching up to demand, and in addition the Nexus 4 finally being offered in more countries?

I think the Nexus 4 also demonstrates the price point, about half that of an unsubsidized iPhone, that would really spike sales, if there was enough supply. As long as one doesn't need LTE support, what wouldn't there be to like in an easily upgraded unlocked phone with stock Android?

That is, what isn't there for the consumer to like. For LG that maybe wanted to sell more higher-priced Optimus Gs, maybe not so much.

newbie reader

Q2...
And what happened with regular Q1 Bloodbath post?

Spawn

Whats interesting about LG is that they are raising with very little sales shops present. Huawei builds more and more, Samsung and Apple are everywhere anyways but LG? Just like Sony or Nokia today, no shops, no shows, only commercials and yet they raise. Hard to argue there isn't demand for something else then Galaxy and iPhone's. There clearly is and LG/Sony seem to be able to fulfit it. I am waiting now for one of themcto realize that there is also strong demand for stock Android, maybe even with Cyanogenmod. Nexus shows that but unfortunately all Nexus models are still not available for many/most markets.

That's a typical hole I would see a pre-Elop Nokia to fill. While majority of markets produces there own ugly and more uglier Android versions and dumps out devi es the same way old Nokia did (ship and forget) jump in, push devices out running Cyanogenmod with own sugger on top, offer years of support. Thing is at the end Nokia realized that and they changed already. N8, N9, N808 received years of support, 3 major upgrades. And then Elop joined, WP7/WP8 incompatibility months later, WP 8.1 taking ages, bringing very less and 8.2 may look like 7.8, an excuse.

So here customers are and buy Nexus like hell cause its not ship and forget. Why nobody else realizes the demand for that? Why Nokia reversed that with Elop again?

Tester

These are good questions.

One thing I'd really like to know how well the stock Android versions of the Galaxy S4 and the HTC One fare.

As for Nexus, for me they are a no-go, for the same reason I don't consider HTC worth purchasing: No SD-Card slot.

Let's be clear about one thing: I got a lot of stuff I don't want to carry around on business trips and other stuff I don't want to carry around when on vacation so I use two SD cards for these purposes and exchange them when needed (or take them out completely some time when I consider it useful.) I don't get it why in this point everybody except Samsung follows Apple's bad example.

newbie reader

of HTC One

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    Tomi Ahonen is a bestselling author whose twelve books on mobile have already been referenced in over 100 books by his peers. Rated the most influential expert in mobile by Forbes in December 2011, Tomi speaks regularly at conferences doing about 20 public speakerships annually. With over 250 public speaking engagements, Tomi been seen by a cumulative audience of over 100,000 people on all six inhabited continents. The former Nokia executive has run a consulting practise on digital convergence, interactive media, engagement marketing, high tech and next generation mobile. Tomi is currently based out of Hong Kong but supports Fortune 500 sized companies across the globe. His reference client list includes Axiata, Bank of America, BBC, BNP Paribas, China Mobile, Emap, Ericsson, Google, Hewlett-Packard, HSBC, IBM, Intel, LG, MTS, Nokia, NTT DoCoMo, Ogilvy, Orange, RIM, Sanomamedia, Telenor, TeliaSonera, Three, Tigo, Vodafone, etc. To see his full bio and his books, visit www.tomiahonen.com Tomi Ahonen lectures at Oxford University's short courses on next generation mobile and digital convergence. Follow him on Twitter as @tomiahonen. Tomi also has a Facebook and Linked In page under his own name. He is available for consulting, speaking engagements and as expert witness, please write to tomi (at) tomiahonen (dot) com

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