LG’s financial situation is a curious one as of late. While the company did, in fact, make a profit during Q1 2016, its mobile segment lost money. Indeed this is not unlike what happened during the same period to its rival from Japan, Sony. Now, after multiple, consecutive months of mounting losses, LG has decided that organizational changes are needed to deal with the situation.
As reported by The Korea Herald, the electronics giant’s CEO, Cho Juno, who also heads the mobile division, sent out an e-mail to employees on Monday with the following:
We need to change the way we work to move faster and lighter. Other business divisions also need people from MC (mobile communications). We will continue to reshuffle personnel.
The company’s Mobile Communication division has now incurred operating losses for three consecutive quarters, including the most recent period of January to March 2016 which saw it post 202 billion won (approximately $170m) in losses. The Korea Herald added that, “the division is expected to streamline its organization and reduce the staff size in order to respond more promptly to different market demands.”
While the news itself might sound concerning, LG has indicated – via a spokesperson – that this is simply part of the company’s annual reshuffling process.
Some may recall this overall situation is quite similar to was happening at Samsung towards the end of 2014, when it was clear that its flagship Galaxy S5 had failed to perform up to market expectations. With LG’s case however, it seems some of the management affected by the news will be transferred to the company’s other business divisions, which were – for reference – profitable in the last quarter.
Isn’t the G5 alive?
Some may immediately ask what is going on, given that the LG G5 has recently released, and by all means should improve revenue and profit. As Q1 2016 ended on March 31st, sales of the device could not be included. Indeed the G5 released in the beginning of April, for all intents and purposes, and as such – as The Verge put it – “LG’s G5 has so far only contributed to growing mobile losses.” In its financial earnings report for the Q1, LG disclosed that there were large expenses incurred as a result of marketing and promotional-related matters surrounding the G5’s launch.
In the same report, LG also indicated that it expects to sell 3 million G5 devices in Q2 which will boost the quarter’s revenue to 3.6 trillion won. Even so, this will only result in a break-even result for its mobile sector.
The future viability of LG’s mobile segment may very well depend on the next major products it launches. A follow-up to last year’s V10 could do quite well. Still, with a new report from just this week indicating that Motorola may unveil an entire modular Moto X product line this year, the short-term viability of LG’s mobile segment could be quickly undermined.
Motorola, for example, is said to be developing numerous modular components which have a number of different functions. Meanwhile, LG has released a very limited number of its Friends so far. If the report pans out, the media is likely to point out just how relatively superior Motorola’s strategy and commitment is when compared to what LG has put forth so far.