LG’s turnaround appears to have completed with today’s earnings results. According to LG’s very own earnings announcement for the past quarter (2Q 2014), the company shipped 14.5 million smartphones, a record high for the company. This is primarily driven by the fact that LG finally knows how to not only make a great smartphone, but also how to market it and sell it to consumers, something they kind of lacked with previous phones like the LG Optimus G and the LG G2. Both the Optimus G and G2 were fantastic devices and pretty much owned the competition whenever they were introduced. However, with the G3, LG clearly learned their lessons from the Optimus G and G2 and were able to capitalize on those lessons to sell more smarphones than ever before. It also helps that LG is still the manufacturer for Google’s Nexus 5 which is still a quite popular phone.
LG has also learned quite a few lessons on how to make software and how not to ruin the Android operating system like some of their competitors have done (ahem, Samsung). So, when people take the LG G3 in their hands, they don’t feel like its a ‘slow’ phone relative to the others. LG’s decision to also go with a higher resolution display also helps the display look much sharper than the competition, which is a big factor when people are looking at a phone.
Obviously, $400 million in profit on $15 billion in revenue is nothing to run around the streets cheering about, as that is still a profit margin of less than 3%. However, it still reflects a 165% increase in profitability from the same period a year ago and is a result of stronger mobile and TV sales (LG’s profit numbers include all divisions together). The mobile unit alone, however, managed to pull in $3.5 billion in revenue and squeeze out about $83.4 million in profit. In fact, LG’s strongest business unit was their air conditioning and energy solutions company, which means that LG’s mobile and TV businesses still have a lot of room to improve upon, but clearly they’ve made some serious progress because $400 million in profit is still quite good.
This is a good turn around for LG’s mobile division and it will be interesting to see how they build on it after the G3, especially with Samsung and HTC following their every step. What I can tell you, though, is that LG is bringing some serious competition to Samsung and HTC and is forcing them to be more competitive on pricing as well. After all, the G3 actually launched at $99 on contract, forcing the Galaxy S5 and One M8 to also drop down to that price if they weren’t there already.