LG Profits Plummet as Smartphones Lose Steam

LG today announced that its third-quarter profit has plunged, as losses in its smartphone business widened. 

The South Korean company earned $6.73 million in the July-September period, down 99 percent from a profit of $733 million a year earlier. Sales in the third quarter fell 2 percent to $11.2 billion.

LG has struggled in the mobile handset sector, where competition from the iPhone and hugely-popular Android-based smart phones from rivals such as HTC and Samsung dominate the market. As a result, phone sales for LG dropped 10 percent to 28.4 million in the third quarter from 31.6 million in the same period last year.

Losses also grew to a record $270 million and margins dropped to a negative 10 percent, reflecting a weak lineup of smart phones and growing development and marketing costs to boost faltering sales of low-priced models.

The flat financial results has increased the pressure. Koo Bon-Joon, a member of LG's founding family, took over as CEO earlier this month, charged with turning around its mobile phone business. Koo has replaced the heads of the struggling phone and TV divisions and begun investing heavily in the research and development of new products.

LG has much riding on its Optimus One model, running on the popular Android platform, and the Optimus 7 based on Microsoft's Windows system. The company unveiled both in October, hoping it will help LG gain traction in the smart phone market.

The low-end Optimus One device has sold 200,000 units since its launch three weeks ago. LG is angling to sell at least 10 million units of the handset.

But whether it is enough for the world's number three mobile phone maker to recover from record losses in the third quarter and turn itself around quickly in a highly competitive smart phone market remains to be seen. 

Motorola Profits from Android, to Launch 22 Smartphones

Motorola yesterday posted a better-than-expected profit for the first time in over three years, due to successful releases from its Google Android smart phones.
Android, which investors saw as an opportunity to jolt the corporation's lagging profits, pulled off the challenging feat. And the Schaumburg, Ill.-based company said it plans to launch an additional 22 smart phones throughout 2011.

Although Motorola plans to split into two separate ventures early next year, selling off part of its networks business to Nokia-Siemens, it will still ship over 9.1 million phones each quarter, including 3.8 million of such smart phones.

In the coming year, co-CEO Sanjay Jha will oversee the production of new mobile devices, while Co-CEO Gregory Brown will take control of the mobility portion, including initiatives in public safety, government and iDEN network units.

In the third quarter, Motorola's profits surged to nearly $109 million, up from a $12 million a year ago.

Controversy continues to steepen as tensions heat up between Motorola and Apple. Verizon, a long-time partner with Motorola, is planning to sell the iPhone early next year. Motorola, meanwhile, has also seen its profits driven by the release of the Droid X and Droid 2, which are carried by Verizon itself.

Impacts are projected by industry analysts, but only for the short term. Analysts estimate that the iPhone release to Verizon will undoubtedly hurt Motorola, but not for a prolonged period of time.

In the past four years, Motorola has been attempting to catch up with similar mobile device manufacturers, like Apple, Nokia and Samsung.

PayPal Introduces Mobile Payments

PayPal recently unveiled software that will let customers use their smart phones to make payments, as well as a platform that allows consumers to pay for digital media, music and games more easily.

The online payment company, owned by Ebay, unveiled Mobile Express Checkout, a software that will transform mobile phones and other handsets into "digital wallets" that consumers can use to buy merchandise, keep coupons and store loyalty program data.

The company also revealed its new digital goods platform, which will allow consumers to make purchases without needing to leave a gaming, video, news or music site. The system will maintain PayPal's current pricing for micro payments, which is five cents plus 5 percent of each transaction. The service will be launched next year.

PayPal announced the new tools at the opening of its Innovate 2010 developers conference in San Francisco.

"Mobile commerce is the most significant change in retailing in the last century," said Osama Bedier, PayPal's vice president of platform, mobile and new ventures. "We're aggressively driving this change by redefining checkout on mobile devices for millions of consumers and businesses."

The new software will not only let smartphone users buy goods from mobile websites over their device, but also encourage people to use their handsets at real-world retail locations connected to the Internet.

The ability to use PayPal at point-of-sale could give the company market share in a $2.4 trillion market dominated by credit card companies like MasterCard and Visa.

Major websites and businesses are lining up to use PayPal's new software tools. Facebook announced at the conference that it would be one of the first to adopt the digital goods platform. Credit card company Discover also announced that it had created its Money Messenger tool with PayPal, which will let users send money to virtually anyone.

With such major players as Facebook and Discover ready to implement PayPal's new software, the payments company should gain share in the mobile payments market, which is estimated to grow to $1 trillion by 2014.