Pressure Grows on Samsung in Q3

Samsung is set to report a year-on-year decrease in third-quarter revenues and operating profits as competition in the global smartphone industry intensifies.

That the world's leading mobile phone manufacturer is feeling the squeeze right now shouldn't come as too much of a surprise: Samsung Electronics Co. Ltd. (Korea: SEC) was already feeling the strain of more intense competition in the second quarter, and the expectation was that the launch of the new Apple iPhone models, plus further competitive pressure from low-cost smartphone rivals in major markets such as China and India, would dent its business. (See Samsung Suffers Smartphone Slowdown, Apple Claims Record iPhone 6 Pre-Sales and Apple's New iPhones Have 20 LTE Bands, VoLTE.)

And it has.

The South Korean giant announced early Tuesday that it expects its third-quarter revenues -- generated by its mobile device, consumer electronics (TVs, household appliances), and memory and screen components lines of business -- to decrease by more than 20% compared with a year ago to 47 trillion Korean Won (US$43.9 billion), while its operating profit is set to drop by almost 60% to KRW 4.1 trillion ($3.8 billion).

Samsung noted that both its mobile devices and consumer electronics lines had a tough quarter. In the smartphone sector, Samsung said that it shipped more devices, but that the average selling price (ASP) was down, "driven by reduced proportional shipments of high-end models coupled with price decreases for older smartphone models." The company also spent a lot on marketing, which also hit its operating profits.

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Looking ahead, the company "cautiously expects increased shipments of new smartphones and strong seasonal demand for TV products," adding that it is preparing to launch new smartphone "lineups featuring new materials and innovative designs, as well as a series of new mid- to low-end smartphones with strong competitive positioning on both hardware specifications and price."

Amazingly, Samsung's share price ended the day slightly higher on the Korean stock exchange, at 1,162,000 Korean Won, suggesting that analysts and investors had been expecting even worse news.

For more background, see this Guardian report.

— Ray Le Maistre, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editor-in-Chief, Light Reading

kq4ym 10/8/2014 | 8:38:54 AM
Re: Does the fightback start here? It does seem lately that news reports are increasing on the India market and other countries where there's a need for very low cost units. As more manufactures enter that market there's surely to be a some periods a glut of product and probable stiff competition for sales. Samsung is going to have to guess right to keep growing it's product line profitably it seems.
[email protected] 10/7/2014 | 8:20:58 AM
Does the fightback start here? I wonder what Microsoft, with its Nokia handset business, is thiking right now?

Looks like Samsung is planning to re-assert itself with new products etc - but how uch can it do against the enduring popularity of the iPhone and the aggressive nature of the lower-cost smartphone companies that are giong to look very attractive in markets where disposable income is low but consumer numbers are high eg India?


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