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Despite the big profit it's still bringing in, Samsung's smartphone sales are slipping amidst competition from the iPhone and cheaper Androids.

Samsung Gets Smartphone Shock: Only $31.3B in Q4

Sarah Reedy
1/24/2014
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Android giant Samsung saw a slip in its revenue in the fourth quarter as it faced increasing competition from the iPhone on the high end and cheaper Androids on the low end.

The South Korean handset maker's mobile division, which is responsible for more than half of its revenue, made 33.89 trillion won ($31.3 billion) in the quarter, down 7% from the previous quarter. Its mobile profit fell 18% from the third quarter to 5.47 trillion won. Overall net income rose 5.4% to 7.22 trillion won ($6.7 billion), but it was the company's slowest profit growth since it fell in 2011. (See Samsung Operating Profit Dips 18% in Q4.)

Despite the big numbers Samsung Corp. still posted, the market didn't react favorably to its decline, which many have been predicting for a while now. (See Falling ASPs Foretell a Smartphone Shakeup.)

Samsung has dominated the Android market for the past few years. According to Juniper Research Ltd. , it accounted for a third of all smartphones shipped (about 85 million) in the third quarter. But, the tables have been starting to turn as it battles Apple Inc. (Nasdaq: AAPL) in court and also in the market, alongside cheaper Androids from makers like Huawei Technologies Co. Ltd. and Lenovo Group Ltd. (Hong Kong: 992). (See Smartphone Shipments Hit Record With Nokia Back in Top 3.)

The company says it expects smartphone demand to decrease next quarter, as well after what is typically the best-performing holiday shopping quarter. Samsung is, however, anticipating growing demand for smartphones as LTE expands in Europe and China, even as it braces for more competition in the feature phone market this year.

— Sarah Reedy, Senior Editor, Light Reading

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SarahReedy
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SarahReedy,
User Rank: Blogger
1/27/2014 | 9:31:16 AM
Re: Tough being on top....
I was being a bit sarcastic with the headline, given how big its mobile revenue still was. But, I don't think it's fair to completely dismiss the impact of competition.

Rutberg today says, "In our view, Samsung continues to be well positioned but 1) the earnings decline is due to natural evolution of smartphone ASPs and unit growth and 2) other OEMs are gaining ground. As one operator executive stated, "Samsung will remain in the top two," but "the delta between the top two and the #3 and #4 will shrink."
Kruz
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Kruz,
User Rank: Light Sabre
1/25/2014 | 4:16:03 AM
Re: Tough being on top....
The figures posted for Samsung are not alarming and IPhones are not responsible for that decline in revenues. It was just expenditures on marketing and a big onetime expenditure. Smartphone shipments slightly declined but tablet shipments surged thanks to Note 10.1 and Galaxy Tab3.

Competition from smaller players is not affecting Sammy (rather affecting Nokia at this time) but 2014 might be the year where these step in. Sony is keen on having a strong foothold, and the Chinese are delivering amazing pieces of Hardware. They will do, 2 years from now, what Koreans did few years ago, with a huge Chinese market to start with.
DanJones
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DanJones,
User Rank: Blogger
1/24/2014 | 6:50:58 PM
Re: Tough being on top....
Wonder if Huawei & ZTE are hitting home in Asia?
SarahReedy
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SarahReedy,
User Rank: Blogger
1/24/2014 | 2:00:09 PM
Re: Samsung....
Financing the phone is certainly similar to paying a contract, but the low-cost phones would shine there because there is less to pay off. I think they'll benefit much more than they have while contract reigns. It'll definitely be interesting to see if that takes hold and changes consumer buying habits. Seems like some will still opt for that iPhone, which appears to be cheaper on a contract.
RitchBlasi
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RitchBlasi,
User Rank: Light Sabre
1/24/2014 | 1:44:32 PM
Samsung....
Well, do one thing and one thing right...correct?  You'll never hear about iOS being fragmented like Android (reminds me of the early Java days) - everything works the same, has the highest quality, and folks will pay for it.  It will be interesting to see what happens to the device market in the U.S. over the next few years when people realize that financing a phone over two years (or whatever upgrade plan is available) is the same as having an ongoing contract -- seeing if people will outright buy a phone and how long they will keep it.
SarahReedy
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SarahReedy,
User Rank: Blogger
1/24/2014 | 1:16:46 PM
Re: Tough being on top....
Yeah, I have a feeling it was more the iPhone pressuring it than other Androids, because HTC also hasn't been doing well. But I'll be curious to see how these smaller Chinese and Indian companies fare in the smartphone market.

Also, maybe Samsung's million sizes of devices isn't resonating with its customers? Is one-size-fits all better?
RitchBlasi
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RitchBlasi,
User Rank: Light Sabre
1/24/2014 | 1:08:33 PM
Tough being on top....
Interesting that both Samsung and Nokia were hard hit this last quarter.  I wonder if some of the smaller companies with the $100-200 smarphones are also impacting sales.  At CES, there were a bunch of companies that were unfamiliar to me but had some very slick products.  It wasn't that long ago that Samsung was the cheaper, low quality device.  How the tables have turned.

 
SarahReedy
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SarahReedy,
User Rank: Blogger
1/24/2014 | 12:17:25 PM
Marketing mix up
Samsung says it is going to lower ts marketing spend this year too. I can see why -- it spent a ton on its huge Super Bowl spend and celeb-ridden commercials, and they don't appear to be working.

 

From Reuters: "We'll actively leverage global sports events such as the Sochi (Winter) Olympics and ourretail channels... but we will try to raise the efficiency of our marketing spend and lower our overall mobile marketing budget to revenue this year compared with last year," Senior Vice President Kim Hyunjoon told analysts after the company released its earnings.
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