• Samsung Looking to Report a 60% Decline in Profits Due to Smartphone Competition

    Samsung recently warned investors of an impending slide in quarterly profits. The decline could amount to a number as high as 60% from the same time last year. The South Korean tech giant claims the stiff competition in the high-end market and the availability of several lower-end options as the reason behind the decline. According to the folks over at Re/code, Samsung Electronics is looking to report an operating profit of $3.8 billion for the third quarter of 2014 which foreshadows the company’s biggest earnings drop in five years.

    When compared to the same three-month period last year, Samsung expected profits is far short of what analysts expected, which stood around an average of $5.2 billion. Samsung claims the loss is due to increased competition in both the high-end and low-end competition in the smartphone market, a decline in display shipments and last but not least, an unexpectedly low demand for television products.

    When it comes to the smartphone industry, Samsung said that shipments have increased compared to previous quarters but profit margins are down as the company is facing competition from Xiaomi in the low-end market and Apple in the high-end market. High-margin devices like the Galaxy S5 have seen less shipments than expected while overall average selling prices are down too. Analysts are claiming that Apple effectively blocked out Samsung’s big-screen smartphone niche at the top-end with the iPhone 6 and 6 Plus for the quarter ending in September. Apple’s latest iPhone lineup has finally marked an entry into the “phablet” industry that the Galaxy line has gone nearly uncontested in for several years.

    To deal with the increased pressure, Samsung said that it plans to grow market share next quarter with devices like the Note 4 and entry-level options which are tailored for the lower-end market. In particular, Samsung has plans to reportedly lower pricing to stay relevant in the booming Chinese market.

    Unsurprisingly, Samsung is being cautious about fourth quarter performance while insiders claim the company’s electronics division is likely to undergo a major restructuring. The Wall Street Journal claims that the restructuring will likely be an attempt to diversify beyond a reliance on smartphones. Based on analyst reports, the WSJ is stating that Samsung’s memory chip business may potentially outperform its mobile arm later this year.

    We’ll have to see what Samsung ends up doing but something needs to change for it to continue to remain relevant going forward.

    Source: Re/code, The Wall Street Journal via AppleInsider
    This article was originally published in forum thread: Samsung Looking to Report a 60% Decline in Profits Due to Smartphone Competition started by Akshay Masand View original post
    Comments 9 Comments
    1. bmwraw8482's Avatar
      bmwraw8482 -
    1. bigboyz's Avatar
      bigboyz -
      ^^My sentiments exactly. That is a huge decline, no matter how many they sold.
    1. fleurya's Avatar
      fleurya -
      Rough day for Samsung shareholders. I won’t say “this is the end of Samsung” like some Apple haters do even as Apple continues to break sales and revenue records, but I will say they are in a tough spot!

      Samsung will have to price cut to stay competitive. Samsung folks, the writing is on the wall. Prepare for lower quality “high end” phones and even lower quality budget phones.

      This might even explain the Note 4 gap issue. Samsung couldn't afford to spend more money to work out the problem, so they litterally did a stop-gap measure to solve it and save money on production.
    1. cbrm's Avatar
      cbrm -
      where's your bendgate now?
    1. therandy's Avatar
      therandy -
      All that money they wasted on advertising sure takes a good bit of the blame!
    1. SpiderManAPV's Avatar
      SpiderManAPV -
      Quote Originally Posted by therandy View Post
      All that money they wasted on bad advertising sure takes a good bit of the blame!
      I edited for you.
    1. Al226's Avatar
      Al226 -
      They have fragmented the market with their "1 phone release per week" strategy, so…fck off Samsung.
    1. nakedcrook's Avatar
      nakedcrook -
      This is hardly anything to be worried about. The fact is, Samsung is still writing reports in black ink. They still have a $3.8 billion profit.

      Reduced profits are still profits (which a company needs to stay operational). Nothing can keep increasing forever. There comes a point when numbers have to decline to create an enviroment for competition. They will eventually break from this slump in their already massive profits.

      When a high-end tech giant (Samsung) is faced with competition from a company that has brainwashed its customer base (Apple) into buying $150 phones for $699 and upwards...it is an uphill battle for sure. It is tough to compete with indoctrination of ignorant consumers.
    1. psxcancer's Avatar
      psxcancer -
      Well wrote out,
      however you neglected to mention the fact that .... Apple has spent millions upon millions of dollars in research and development. Something Apple is entitled to recoup. Unlike other companies that copycat (mentioning no names, but you know who you are), Of course they (Samsung) are going to have a bigger margin because they didn't have to spend all the money on research and development, product testing and so on and so on.
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