More Problems For LG Electronics As Losses Mount

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LG Electronics who spent 2010 sacking senior management in Australia while defending allegations that they deliberately misled consumers over the performance of their appliances is now looking for a new advertising and PR company after reporting significant losses in the all-important October to December 2010 Quarter.Last night LG Electronics announced a loss of $230m for the quarter, its first in seven quarters, compared with profit a year earlier. At the recent CES show in Las Vegas LG went out of their way to reposition their appliance range with the company claiming that Appliances was set to be a key part of their marketing in Australia.

A big issue for LG has been the decline in sales of their Smartphones. Under the previous Australian Marketing Director, David Brand, the company spent millions trying to position the LG mobile range as fashion items. At one event actor Chris Noth, of ‘Law and Order’ and ‘Sex in the City’ fame was hired to promote the LG mobile brand, with mainstream advertising and PR events. The end result was that consumers failed to buy the LG phones and carriers like Telstra, Optus and Vodafone dumped the brand from their line up in favour of the HTC range that had little, if any, advertising promotion.     

LG’s mobile phone division, which generates about one fifth of the company’s total revenue, posted a $247M operating loss as handset sales fell 15 per cent.

The deep loss comes as LG seeks to overcome a major problem in its handset operations, where it has fallen well behind global rivals such as Samsung Electronics and Apple in offering feature-packed high-margin smartphones.

“We are targeting to sell a total of 120 million cellphones globally this year and smartphone sales will be around 19 percent of that total shipment,” said Jung. Last year, LG sold 116.6 million cellphones.

LG launched its first smartphone, the Optimus One, based on the Android platform, in September, six months after Apple introduced the iPhone 4 and Samsung unveiled the Galaxy S. LG Australia is refusing to say how well the phone has sold in Australia however carriers are reporting sales as “slow”.

 

In Australia the new management team is set to spark an Appliance war with Samsung and the likes of Fisher & Paykel as they look to reposition the LG brand as a market leader in energy-saving smart technology for home appliances such as washing machines and refrigerators. It is also set to launch a robotic vacuum cleaner up against a similar Samsung offering.

Sales from LG’s home entertainment division, which makes flat-screen TVs and plasma display panels and accounts for around 40 percent of total revenue, rose 5 percent to KRW6.205 trillion from KRW5.928 trillion.

For 2011, LG set a record sales target of KRW59 trillion ($52.8 billion) and said it plans to invest a total of KRW4.8 trillion in capital expenditure. LG posted KRW55.8 trillion in sales in 2010.

“Under new senior management, the company will continue to invest in high potential businesses such as solar energy, commercial air conditioning and water treatment,” LG Electronics said in a statement.

Earlier this month LG Electronics globally said that they were set to review their relationship with both their global advertising agency and PR Company.

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