LG is no stranger to smartphones and tablets. Most people know the company by their many products ranging anywhere from washer and dryers to refrigerators and televisions. They've been competing in the mobile markets and similar to HTC who announced recently that they'll be focusing on one thing rather than another, LG plans to focus more on smartphones and less on tablets.
The reasoning and idea behind it, before we get into the official answer, is probably pretty simple. Ridiculous amount of competition. With that said, the company has come to a realization with their lack of success in tablets that it's probably best to put any and all development of them on the backburner. If a product line is constantly burning a hole in a company's pocket and consistently underperforming, simply makes sense to shut it down.
This doesn't mean LG will stay away from the tablet market forever, just that they're going to focus on what's already working for them and, who knows, might see them get back to tablets. Now, they're going to focus on making high quality smartphones, similar to again, HTC's announcement last week. In all reality, LG isn't the only manufacturer of Android devices that is having trouble with selling tablets. Heck, the whole industry is doing what they can to compete with the iPad which remains the supreme leader.
Either way, with the company's track record with other electronics, maybe this move is the best thing for them and they can start churning out some much stronger products. A tablet is great, but several high quality, strong selling smartphones isn't bad either.