Samsung profit falls as smartphone sales slow

Published on NewsOK Modified: July 31, 2014 at 12:52 am •  Published: July 31, 2014
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SEOUL, South Korea (AP) — 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 percent in Seoul.

Its net income for the April-June quarter dropped 20 percent 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 percent to 52.4 trillion won while operating profit sank 25 percent 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 percent 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 percent from a year earlier, even as the overall smartphone market expanded 23 percent. 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 percent from 32 percent. 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 percent of its overall profit. That fell to about 60 percent 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.

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