LG's smartphone sales dip in Q2 despite G4 launch

LG Electronics said sales in its mobile unit were flat in the second quarter and smartphone shipments declined. The company's mobile unit hit a snag despite the introduction of its latest flagship smartphone, the G4, which went on sale in the U.S. in early June after being introduced in April.

In a bright spot, LG did say that mobile sales in North America increased by 36 percent year-over-year due to stronger performance of its mid-range smartphones and tablets.

Overall, the South Korean electronics conglomerate said that net profit in the second quarter plunged 45 percent to $195 million (226 billion South Korean won), down from $355.4 million a year ago. Reuters reported it was its weakest three-month profit for LG since the fourth quarter of 2013, and well below the $340.7 million average estimate from a Thomson Reuters survey of 33 analysts. Total sales were down 8 percent from a year ago to $11.99 billion.

Sales in the company's mobile business were flat at $3.14 billion. LG eked out a tiny profit of just around $172,000 in its mobile business, a dramatic drop compared to the $74.8 million it reported a year ago. The company's mobile operating profit margin fell from 2.4 percent to zero, which LG said was due to price declines as a result of intensified competition and increased marketing expenses with the launch of G4.

LG shipped a total of 17 million total phones (smartphones plus feature phones) in the second quarter, down from 19.9 million in the first quarter and 19 million in the year-ago period. LG sold a total of 14.1 million smartphones in the second quarter, down from 15.4 million in the first quarter and 14.5 million a year ago.

Verizon Wireless (NYSE: VZ), AT&T Mobility (NYSE: T), Sprint (NYSE: S), T-Mobile US (NYSE:TMUS) and U.S. Cellular (NYSE:USM) all launched the G4. However, they did not do so until the first week of June, which likely limited sales for the second quarter. The G4 features improved performance and a high-end camera and also comes with a variety of leather back plates.

An LG spokeswoman told The Wall Street Journal that the G4 will continue to contribute to the company's third-quarter earnings. However, according to the Associated Press, LG plans to unveil a new flagship smartphone in the fall, a new tactic since the company has released just one flagship phone per year the last several years.

LG faces challenges from Chinese rivals Huawei, Lenovo and Xaiomi in the smartphone market, not to mention Samsung Electronics and Apple (NASDAQ: AAPL) in the high end of the market. LG said that in the second quarter, sales fell 29 percent in South Korea due to weaker demand.

"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," the company said in a statement. "In the third quarter and beyond, LG will more aggressively implement its dual strategy focusing on both premium devices as well as mid-range smartphones targeting emerging markets."

LG said that despite weak demand in emerging markets and tougher competition, it plans to "increase sales continuously with stronger premium smartphone sales mainly with G4" and the launch of new models in the mass-market smartphone segment.

For more:
- see this release
- see this WSJ article (sub. req.)
- see this Reuters article
- see this AP article

Special Report: Wireless in the second quarter of 2015

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