LG Q2 Results, makes strong play for 3rd biggest smartphone maker at this time

And the Q2 results keep rolling in. Now we have LG results. And after their disasterous misadventure on Microsoft pushed their profitable handset business into severe loss-making, they then abandoned that and went pure Android. And the profits came back. Now LG smartphone business is very healthy, it has returned to competitive growth, and is picking up tons of market share.

Results for Q2. 12.1 million smartphones sold, up 17% from Q1 when LG was ranked 4th just behind Huawei. As Q1 is the gift-giving season in China (Huawei's primary market) we can expect Huawei to be flat or even down now in Q2, so LG's strong growth is very promising to jump LG to the top of the 'dwarfs' of smartphones. I Tweeted earlier this week that our industry how has Samsung, Apple and 9 Dwarfs in smartphones (the nine dwarfs are Huawei, LG, Sony, Lenovo, ZTE, Coolpad, Nokia, Blackberry and HTC).

So LG's market share is a preliminary 5.6%, up from 4.8% last quarter. LG was down in 2% territory at its bleakest moments when its smartphones were powered by Windows. So this shows that abandoning Windows and going Android is at least a plausible path back to prosperity for a struggling smartphone maker (like Nokia - Fire Elop Now!).

So good job LG! Keep up this work and bring up the pressure on the two top dogs. We need strong smartphone maker rivals to the duopoly of Samsung and Apple.  

Comments

[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...").