Samsung faces profit fall
January 8, 2015
Samsung Electronics, the world's largest smartphone maker, was headed for its first annual profit decline since 2011, according to preliminary results released by the company Thursday.
Operating profit for the October-December period was estimated at 5.2 trillion won (3.99 billion euros, $4.7 billion), down 37 percent year-on-year, but up 28 percent from the previous quarter.
The results beat analyst forecasts of 4.8 trillion won as strong demand for memory chips helped offset sluggish sales in the key mobile sector.
"This is much better than expected," said Greg Roh of HMC Investment Securities, adding that "semi-conductor sales have benefited from a weaker won and TV sets sold well during the peak season."
"I expect profits to continue improving through at least the second quarter of 2015," Roh predicted.
Tough competition
Still, the South Korean tech giant continues to struggle as Apple's new iPhones and cheaper Chinese rivals have put a dent in Samsung's dominance. For the moment, the company still leads in global sales volume, but its share of the smartphone market has fallen to 25 percent from 35 percent a year ago, according to Strategy Analytics.
Whereas the mobile division contributed about 68 percent to the company's profits in 2013, that number had slipped to just 44 percent nine months later. That contributed to net profit declines of 20 and 50 percent in the second and third quarters respectively.
Restructuring plans
Samsung plans to slash the number of new smartphone models in 2015 and instead double down on efforts to conquer the mid-to-lower tier smartphone market. But some analysts are skeptical that a pivot to cheaper phones will do much to stop the bleeding:
"It'd be hard to expect a sharp pickup in earnings from the mobile division in the absence of a hit product," said Baik Jae-yer of Korea Investment Trust Management.
A more fundamental overhaul of the family-run conglomerate is also expected ahead as the Seoul-based behemoth faces its first leadership change in a generation. The ailing patriarch Lee Kun-Hee is expected to hand over control to his only son, Lee Jae-Yong.
pad/hg (AFP, dpa, Reuters)