April 25, 2013

Does LG Electronics' Future Hinge on Flexible Smartphones?


That "other South Korean electronics company," aka LG Electronics, reported its fiscal Q1 2013 earnings this week, and, well, they weren't very good. Samsung, whose earnings we expect to report on very early tomorrow morning, will on the other hand be reporting an entirely different financial scenario - one of health, wealth and generally enormous well-being. It's definitely a tale of two different companies this year.

The worst of the financial news for LG is that fiscal Q1 2013 net profit slumped an overwhelming 91 percent from a year earlier. This caught many analysts by surprise. LG was expected to post a net profit of 235.8 billion won ($212.2 million) according to consensus analyst estimates. LG didn't quite get there, instead reporting net profit of only 22 billion won ($19.8 million), as compared to 247.5 billion won ($222.7 million) a year earlier. Operating profit fell 13 percent to 349 billion won from 402 billion won a year earlier. Overall revenue did rise 6.8 percent to 14.1 trillion won from 13.2 trillion won.

The company's first-quarter operating margin from its home-appliance unit fell to 3.6 percent from 5.7 percent a year earlier. That said, LG's mobile business operating margin did manage to rise to 4.1 percent from 1.4 percent a year earlier. LG managed to ship 10.3 million smartphones during the quarter, an encouraging sign, and projects that shipments this year will reach at 45 million units.

The company certainly has some solid phones in hand that should help put some truth to the claim, and some of which are able to match Samsung's coolest new Galaxy S4 features - such as eye tracking. LG's flagship is the Optimus G Pro, which will be built in two sizes - a 5-inch display version that will target Japan, and a slightly larger 5.5-inch display version that will ship everywhere else, including North America. Half an inch may not sound like much but it adds to the size overall in tangible ways. The Optimus G Pro is shown below.



The new smartphone will deliver on a 1,920 x 1,080 HD display, along with a solid screen resolution of 400 ppi. A Qualcomm quad-core Snapdragon 600 processor clocked at 1.7 GHz powers Android Jelly Bean 4.1.2. and NFC capability is provided. The Optimus G Pro also sports a 13 megapixel camera, along with a front facing 2.1 megapixel. The battery is removable and also hefty at 3,140 mAh.

Regardless of the Optimus G Pro's capabilities, LG knows it will likely need to do more for the mobile group to drive revenue growth. Can it? That is exactly what Yoon Bu-hyun, vice president of LG's global mobile business looks to have up his sleeve. He noted that the company will work closely with its partner LG Display to introduce a smartphone with a flexible OLED screen in Q4 2013. LG has certainly made a great deal of progress on its flexible display technology and we believe it has the ability to deliver some sort of flexible smartphone.

But what are the odds that LG can actually deliver a true flexible smartphone by Q4 2013? And what, exactly, does "flexible" mean here? Does it mean a device with perhaps slightly rounded screen edges? Technically that would qualify, though of course that isn't what the consumer world at large would take to mean "flexible." Most consumers will translate "flexible" into "bendable," and that is not where the world will be any time soon. Still, a device with a rounded edges screen may be enough of a differentiator to significantly boost LG's 2013 holiday buying season sales.

Samsung of course has its own flexible OLED technology - dubbed Youm - in hand, though there are currently no indications that the company would deliver any devices utilizing it in 2013. If LG can really beat Samsung to the punch this year on the flexible display front, it would likely spur revenue growth.

We look forward to seeing if such a beast is indeed just around the "bend."




Edited by Alisen Downey




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