LG Still Marginalized in Smartphone Market

It says something about the direction of the cellphone market that LG sold 30.6 million handsets in its second quarter and that division still lost $101 million, contributing to a gruesome 33 percent drop in net profit.

And that loss was triple the one projected by analysts.

Late to the smartphone market and slow to innovate once it arrived, LG–the world’s third-largest mobile phone maker–has been dragged down by its handset division, which continues to struggle for…purchase in the smartphone market. That’s got to change and quickly, too, if the company hopes to return to profitability anytime soon. Because while LG sold more handsets in its second quarter, they were largely low-end phones whose prices were slashed to boost sales. End result: An operating loss margin of 3.5 percent in the company’s handset division, compared with a 0.9 percent profit margin in the first quarter.

LG said earlier this year that it’s investing more heavily in smartphone R&D in the hope of developing a device that can compete with the likes of the iPhone and Droid, and its leadership reiterated that commitment during an earnings call today. But it cautioned that it is unlikely to see any meaningful momentum until later this year following the debut of some new Android-based smartphones. “We are increasing investment in research and development to launch competitive smartphone models and thus any meaningful recovery is unlikely in the near future,” LG CFO Jung Do-hyun explained. “Our handset business will continue to experience difficulties in the third quarter and would start recover from the late fourth quarter.”