Accessibility/Mobile Features
Skip Navigation
Skip to Content
Editorial News
Business
Classified Sites

The Canadian Press - ONLINE EDITION

Samsung's 2Q profit falls more than expected as smartphone sales slow

A man walks by an advertisement of Samsung Electronics' Galaxy S5 smartphone at the company's showroom in Seoul, South Korea, Thursday, July 31, 2014. Samsung Electronics Co. reported a bigger-than-expected fall in second quarter profit on Thursday and said it was uncertain if earnings from its handset business would improve in the current quarter.(AP Photo/Ahn Young-joon)

Enlarge Image

A man walks by an advertisement of Samsung Electronics' Galaxy S5 smartphone at the company's showroom in Seoul, South Korea, Thursday, July 31, 2014. Samsung Electronics Co. reported a bigger-than-expected fall in second quarter profit on Thursday and said it was uncertain if earnings from its handset business would improve in the current quarter.(AP Photo/Ahn Young-joon)

SEOUL, South Korea - Samsung Electronics Co. reported a bigger-than-expected fall in second quarter profit on Thursday and said it was uncertain if earnings from its handset business would improve in the current quarter.

Samsung warned earlier this month that the second quarter would be its worst in two years as rapid growth in smartphone sales had faded. The company particularly struggled to compete in cheap smartphones, currently the fastest growing part of the global smartphone business. Samsung shares dived 4 per cent in Seoul.

Its net income for the April-June quarter dropped 20 per cent to 6.3 trillion won ($6.1 billion) from 7.8 trillion won a year earlier. That was the lowest since the second quarter of 2012. Analysts surveyed by FactSet forecast 6.5 trillion won income.

Sales fell 9 per cent to 52.4 trillion won while operating profit sank 25 per cent to 7.2 trillion won, in line with Samsung's guidance earlier this month.

Robert Yi, head of investor relations, told a conference call that Samsung had higher marketing expenses as competition increased in mid- to low-end smartphones and because it tried to clear old inventory before the release of updated smartphone models in the fall. Tablet computer sales also fell, he said, citing weak overall demand.

Samsung sold 95 million mobile handsets in the quarter and smartphones were close to 80 per cent of those sales, Yi said. It sold 8 million tablet PCs.

Research firm IDC estimated that Samsung shipped 74.3 million smartphones during the second quarter, down 4 per cent from a year earlier, even as the overall smartphone market expanded 23 per cent. Chinese vendors, Huawei and Lenovo, were the companies that drove growth in global smartphone sales.

Samsung was still the world's largest supplier of smartphones but its global market share fell to 25 per cent from 32 per cent. The company's smartphones use Google's Android operating system.

With lower handset sales, Samsung's profits also took a hit. Samsung's mobile business recorded 4.4 trillion won in operating profit during the second quarter, the lowest in two years. Previously, Samsung's mobile business contributed about 70 per cent of its overall profit. That fell to about 60 per cent in the second quarter.

Analysts said Samsung struggled in developing nations as consumers using handsets powered by the popular Android operating system were more willing to try devices from other brands. Switching between different Android devices has become easier and cheaper than before for consumers, reducing loyalty to one brand.

Smartphones have become ubiquitous in developed markets and are becoming so in emerging markets, making it harder to find people who are buying a smartphone for the first time, said Melissa Chau, senior research manager at IDC, a market research firm. "Just staying on Android is not going to keep you in one brand."

That would make it more important for Samsung to develop unique services for its Galaxy phone users or to push use of its own software that does not rely on Google's Android.

Samsung has stumbled in its efforts to make even a small move away from Android. Earlier this week, it delayed the release of the first smartphone powered by Tizen, its own mobile operating system, just two months after announcing a launch date. It did not give a future schedule.

For the third quarter, Samsung forecast it would sell more handsets as there is usually higher demand for consumer electronics during that period. But it would also face higher competition.

Apple Inc. is expected to release a new iPhone with a larger screen, the key feature in Galaxy phones that helped Samsung lure consumers from the iPhone.

"Looking ahead, the second half of 2014 will remain a challenge," Samsung said in a statement.

In the previous years, Samsung released one high-end model during the third quarter. But this year, Samsung hinted that there will be one additional high-end model.

Kim Hyunjoon, senior vice-president at Samsung's mobile business, told the conference call that several new handset models are in the pipeline for launch in the next few months.

They include a new flagship model in the large-screen category and another premium phone with new design and materials. Kim did not elaborate what the new materials would be. In 2013, Samsung unveiled a smartphone with a curved display that was released in South Korea only.

  • Rate this Rate This Star Icon
  • This article has not yet been rated.
  • We want you to tell us what you think of our articles. If the story moves you, compels you to act or tells you something you didn’t know, mark it high. If you thought it was well written, do the same. If it doesn’t meet your standards, mark it accordingly.

    You can also register and/or login to the site and join the conversation by leaving a comment.

    Rate it yourself by rolling over the stars and clicking when you reach your desired rating. We want you to tell us what you think of our articles. If the story moves you, compels you to act or tells you something you didn’t know, mark it high.

Sort by: Newest to Oldest | Oldest to Newest | Most Popular 0 Commentscomment icon

You can comment on most stories on brandonsun.com. You can also agree or disagree with other comments. All you need to do is register and/or login and you can join the conversation and give your feedback.

There are no comments at the moment. Be the first to post a comment below.

Post Your Commentcomment icon

Comment
  • You have characters left

The Brandon Sun does not necessarily endorse any of the views posted. Comments are moderated before publication. By submitting your comment, you agree to our Terms and Conditions. New to commenting? Check out our Frequently Asked Questions.

letters

Make text: Larger | Smaller

Brandon Sun Business Directory
The First World War at 100
Why Not Minot?
Welcome to Winnipeg

Social Media

Canadian Mortgage Rates