Samsung profit slips further on flat sales

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Reuters

Cellphone users sit outside Samsung Electronics' headquarters in Seoul. The biggest smartphone maker's estimated operating profit for the first quarter was down from a year earlier, even as the mobile division lifted estimated profit after the earlier-than-expected release of the Galaxy S5 handset. File photo: Reuters

Seoul - Samsung Electronics posted estimated first-quarter operating profit of 8.4 trillion won (R83 billion) yesterday, marking a second consecutive year-on-year decline as global smartphone sales slow.

The estimate was in line with market expectations for operating profit of between 8.14 trillion won and 8.63 trillion won for the January to March period at the largest cellphone maker.

“The operating profit fell for two straight quarters year on year as profit margins in smartphones were falling and the growth rate in smartphone sales was decreasing due to growing competition,” analyst Young Park of Hyundai Securities said.

While the figure is 1.1 percent up on the previous quarter, it is 4.3 percent lower than a year earlier, when the South Korean giant – the world’s largest technology firm by sales – recorded operating profit of 8.78 trillion won.

It follows Samsung’s posting of fourth-quarter operating profit that was 6 percent lower than a year earlier.

The company said its first-quarter sales were estimated at 53 trillion won, up 0.24 percent from a year earlier.

Shares in Samsung fell 0.21 percent to close at 1.39 million won yesterday in a flat Seoul market.

Fixed first-quarter earnings are set to be announced later this month. The figures come as growth in smartphone sales slows, with mature markets like North America and Europe near saturation. This, coupled with the rapid expansion of smaller rivals like China’s Huawei, has pressured Samsung to roll out cheaper handsets to woo consumers in emerging markets, especially China.

Research firm International Data Corporation estimated the average selling price of smartphones will fall to $265 (R2 791) globally by 2017 from $337 last year and $387 in 2012.

Nonetheless, estimated profit for Samsung’s mobile division grew to 6.2 trillion won in the first quarter, up from 5.5 trillion won in the three previous months, Park said.

This followed the earlier-than-expected release of its latest Galaxy S5 smartphone – which Samsung hoped would cement its lead in the global smartphone market – in South Korea, analysts said.

For the whole of this year, Samsung’s operating profit was likely to be around 37 trillion won, about the same as last year’s, Park said.

The company made more than 30 percent of all smartphones sold in the world last year, nearly twice the share of arch-rival Apple.

But Samsung is also faced with a daunting challenge to maintain momentum in an increasingly saturated market.

Major handset makers have recently stepped up efforts to develop wearable devices, seen as a new source for growth – though few have managed to garner large consumer excitement or sales.

Samsung’s first internet-enabled smartwatch, launched in September last year, was greeted coldly by consumers who saw it as unfashionable. Its second edition, the Gear 2, was introduced in February.

Apple is believed to be planning its own smartwatch launch soon, while Google is moving towards a wider consumer launch of its internet-enabled eyewear, Glass.

Samsung is also under pressure to set aside more cash for legal bills as years-long patent battles against Apple continue.

The two have locked horns in patent suits in several nations involving design and technologies on their smartphones and tablet computers. – Sapa-AFP


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