Investors Concerned As LG Forecasts 80% Profit Drop In Q4 2018

LG Electronics is expecting its operating profit in the final quarter of 2018 reached the equivalent of $67.2 million, dropping by some 80-percent compared to the same period in 2017. The company's latest financial guidance raised concerns among investors, especially as it comes at a time following historic growth across virtually every segment bar (Android) smartphones. The company's consolidated revenues surpassed $14.1 billion over the fourth quarter of 2018, a significant decline compared to the $15.3 billion turnover reported for the fourth quarter of 2017, its highest such figure ever.

LG's total 2018 revenue reached approximately $54.7 billion, which is yet another segment wherein the firm decline over the course of the last twelve months seeing how its 2017 turnover surpassed $55.4 billion. No performance breakdowns have yet been provided by LG and a per-unit look at its business results will only be published as part of its consolidated financial report for the entire year that's scheduled to go live later this month.

An ambivalent year for South Korean big tech

LG's underwhelming conclusion of 2018 is far from the only disappointment tech investors experienced over the course of the last several days, with Samsung also posting a rather mixed guidance earlier this year. Even outside of South Korea, the consumer electronics industry as a whole currently appears to be struggling, especially in the smartphone segment that has never experienced such a massive degree of saturation. Samsung's fourth-quarter guidance was somewhat more revealing than LG's new forecast in that it specifically pointed to a higher level of handset competition and a decline in memory chip demand as one of the reasons for its revenue and profit drop-off experienced in the final three months of 2018.

While LG is not a silicon behemoth Samsung is, the growing competition in the smartphone segment certainly affected the company's performance over the three-month period ending December 31, especially given how its mobile unit as a whole has been struggling to break even for several years now, having only managed to do so temporarily in conjunction with aggressive cost cuts. Recent analyst forecasts predicted a continued decline of the firm's smartphone operations due to an increase in marketing costs required for them to stay relevant, though skeptics have been the device category that matters the most in terms of profits — flagships — is an area where LG has been pushed to the brink of obscurity years ago.

From one chaos to another

LG's 2018 strategy in the high-end segment of the handset market has been often described as chaotic, with the company releasing a surprising number of flagships which ultimately even managed to confuse some of its most loyal customers. Given recent reports and even official statements, LG is planning to double down on that approach throughout 2019. Among other things, the firm will be releasing follow-ups to both the G7 and V40 ThinQ, in addition to debuting at least one foldable smartphone which is likely to launch in the second half of the year. At the same time, LG is also looking toward the fifth generation of mobile networks and plans to commercialize several such offerings in 2019, one of which will be made available to Sprint customers, as recently confirmed by the wireless carrier itself.

And while industry leader Samsung intends to embrace 5G as part of its established product lineups — i.e. the Galaxy s and Galaxy Note ranges — LG intends to position its premier 5G-ready Android smartphone as the start of an entirely new brand, industry insiders from South Korea said late last month. That strategy should hence result in an even greater number of high-end lineups from LG in 2019, further diluting the company's mobile offerings. Given how Samsung is presently doubling down on smartphone innovations and Huawei is on a roll in terms of mobile photography, artificial intelligence, and several other major selling points of contemporary handsets, LG's decision to continue with its flagship diversification efforts comes at a time when such a decision could be punished the most if it ends up being the wrong one.

Whatever happens, LG is likely to share more details on its plans in the Android space no later than next month, with Mobile World Congress being scheduled to kick off in Barcelona, Spain, on February 25. The company is at the very least expected to introduce the G8 ThinQ flagship at the upcoming trade show, together with its pricing and availability details.

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Dominik Bosnjak

Head Editor
Dominik started at AndroidHeadlines in 2016 and is the Head Editor of the site today. He’s approaching his first full decade in the media industry, with his background being primarily in technology, gaming, and entertainment. These days, his focus is more on the political side of the tech game, as well as data privacy issues, with him looking at both of those through the prism of Android. Contact him at [email protected]