Samsung Profits Sink For Second Quarter In A Row
Samsung (OTC: SSNLF), the world’s largest maker of smartphones reported a second straight quarter of declining profits Tuesday. The decline stemmed from slowing demand for high-end devices like the Galaxy S4 smartphone.
Profits fell, the company said, from 8.8 trillion won to 8.4 trillion ($8 billion) for the quarter ending in March. Analysts had predicted 8.3 trillion won in profit, so although the number was lower than the previous quarter, it still beat analyst estimates.
While Samsung hoped the recent unveiling of its flagship Galaxy S5 smartphone and an expanded range of tablet computers would boost demand, the company also acknowledged the importance of lower-priced devices.
According to Bloomberg, Marcello Ahn, analyst at Quad Investment Management in Seoul said, “Samsung’s smartphone sales strategy is changing to churning out a wider and varied product lineups with lower price tags, rather than placing its focus on one blockbuster model. Despite falling average selling price of smartphones due to slowing high-end demand, Samsung smartphones outsold second-tier laggards.”
Earning fell 7.9 percent from a year earlier in the December quarter according to Bloomberg.
Samsung’s 5.1-inch Galaxy S5, which should be available outside South Korea starting April 11 was designed to fight back against Apple's (NASDAQ: AAPL) iPhone 5S and 5c, both of which were released in September.
The company said in January that it expected to release its next large-screen Note device in the second half of 2014. Speculation suggested that the new Note might have a three-sided display so messages could be read from an angle.
If high-end devices don’t drive increased profits, emerging markets might provide some relief – assuming Samsung can compete with Apple and others. Data reported by The Associated Press showed Samsung sold a record number of smartphones in China in February. Apple came in second, tied with Lenovo.
In addition, Samsung was trying to improve internal efficiency and cut costs in an attempt to increase profits. As a result, the company indicated that promotion and advertising for the new Galaxy S5 would be reduced compared with the launch of the S4.
Adding to Samsung’s woes, ongoing legal battles with Apple, including a brand new lawsuit filed by Apple. In the latest suit, Apple claimed Samsung copied iPhone features and should be ordered to pay more than $2 billion in damages.
At the time of this writing, Jim Probasco had no position in any mentioned securities.
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