Life's (Not So) Good

Follow-up to LG dreams of smartphones.

LG Doesn’t See Return To Operating Profit Until Early Next Year

By Roger Cheng and Jung-Ah Lee  Of DOW JONES NEWSWIRES

SEOUL (Dow Jones)–LG Electronics (066570.SE), which readily concedes it is late to the smartphone game, said it plans to launch 10 more smartphones and sell 5 million devices by the end of the year as it scrambles to catch up with the rest of the industry.

But the aggressive move, which includes increasing the research and development budget by a third and ramping up its spending on marketing, means the company’s once-flagship mobile devices unit won’t likely return to an operating profit until early next year, said Chang Ma, vice president of marketing for the division.

“We have to just bear it,” Ma told Dow Jones Newswires on Wednesday, adding that he hopes to see a turnaround after the fourth quarter.

It takes R&D to make an Android phone?

(Thanks to MfH for link.)

  • "It takes R&D to make an Android phone?"

    — Maybe they read your blog and decided they needed to do something better?

  • poru

    What I never understand is why these manufacturers with one notable exception find it necessary to swamp the market with literally dozens of models of phones, often with unintuitive and completely unmemorable model numbers. (I'm looking at you, Nokia!) Surely there is a significant overhead just in maintaining all the models in terms of parts, marketing, inventory tracking, not to mention the basic engineering. And have they never heard of "the tyranny of choice"? The side effect is a web site that becomes unnavigable and frustrating to use if one actually wants to buy something. /rant

  • Iphoned

    They could just rip off someone else's IP and save R&D cost. Google said on their last earnings call that their Android R&D cost are not material.

  • “It takes R&D to make an Android phone?”

    Hardware? Customised UI?

  • Tom

    I have considered the hsb wk on incumbents and disruptive entrants. So, does the Android OS provide new skills for incumbents like HTC, LG, SE, etc. to fight back against AAPL, first with a juggernaut of phones, and next with a new juggernaut of tablets? Aren't we seeing a bruising battle unfolding before us in these disruptive yet symmetric markets, where incumbents can't flee and so they're fighting?

    • I can answer the question of Android for the incumbents with an example. When the PC emerged, Windows offered an opportunity for companies like IBM, Digital, Honeywell, NCR, Prime, Sun, Apollo and others in the mini-computer business to forge ahead with the new "micro-computer" market. The fact that none (except belatedly IBM) survived the transition should provide a clue. The incumbents could not go forward successfully with the new licensed software model because their margins and their entire customer relationships would have to change. Not a single mainframe or mini-computer manufacturer survived the transition to micro-computers and only a slew of computing entrants prospered (Dell, Apple, HP, Toshiba, Sony, Acer, etc.)

      So the question of embracing a disruption depends on whether you can take that technology and wrap your existing business model around it. We can get into the question of whether smartphones (or as I call them mobile computers vis-a-vis micro-computers) represent a completely new business model and customer relationship than voice phones. I think they do.

  • dom

    Surely it takes R&D to make any decent phone. Apple for example have spent over $100M on their labs – they would have to do that regardless of the software.

    • It does take a lot of money to make a decent phone, but we're talking about Android phones.

      It takes R&D to make Macs, but PC vendors don't spend any money on R&D.

      Similarly for Windows Mobile, there were over 1700 devices launched running Windows Mobile from hundreds of vendors. They did not spend much on R&D either–put it this way, if they had to they would not have even tried.

      When you take a license for the software that powers your device, you abdicate any control and hence any responsibility. R&D is leverage, but with a licensed software platform there is nothing to lever.

  • Tom

    So, what and or who is driving android OS development? It was 1.5; now 2.2….

  • Android is driven by Google. The cost of Android development however is immaterial to Google. That's not to say it's cheap, but it's not a lot for Google. Google has had the benefit of reusing a lot of code. First, Linux, and second Java. The equivalent cost of developing Windows Mobile or Symbian/Series 60 was much higher, probably an order of magnitude higher.