Samsung posts disappointing earnings; revenue, profit down

30 Jul 2015 | Author: | No comments yet »

Samsung Galaxy S6 to become cheaper after disappointing sales.

Samsung Electronics’ net profit for the second quarter fell 8 per cent as sales for the company’s flagship Galaxy S6 smartphone fell short of market expectations. three-months ended June 30 was 5.75 trillion Korean won ($6.7 billion), down from 6.25 trillion won for the corresponding period a year ago, the company said. The South Korean company said in its second-quarter earnings report that it will “adjust” the prices of the two flagship phones that were introduced in March this year in order to maintain “sales momentum”, adding that the company’s mobile division expects a “difficult business environment” in the second half of the year. “Despite the launch of Galaxy S6, improvement to earnings was quite marginal due to low smartphone shipments and an increase in marketing expenses for new product launches,” Samsung said in the statement.Seoul – South Korean giant Samsung Electronics posted an 8.0 percent fall in second quarter net profit on Thursday and promised “flexible” pricing of its new flagship smartphone after less-than-stellar sales contributed to a slump in its mobile unit’s earnings. It is the fifth straight quarter the company has posted a year-over-year profit decline, as low-cost rivals from China and India continue to weigh on Samsung’s market share and profit margins, particularly for mid-range smartphone models. This could refer to the Samsung Galaxy Note launch, rumoured to take place in New York next week. “New middle- and low-end models will also be introduced,” the company added.

The conglomerate has now seen its net profit decline for five straight quarters year-on-year, mainly due to heightened competition in an increasingly saturated smartphone market that it had dominated for years. Samsung’s dominance is being chipped away at the low-to-mid end by Chinese rivals such as Huawei Technologies Co Ltd and in the premium segment by Apple, while some markets show signs of saturation. Samsung has faced a double challenge from US arch-rival Apple in the high-end smartphone market and rising Chinese firms like Xiaomi in the mid- and low-end market. Problems for the S6 Edge started when the number of handsets produces was lower than those demanded because of the device’s difficult to manufacture curved screen.

Samsung remained the top smartphone maker in April-June, but shipments fell in part due to an inability to build enough curved-screen Galaxy S6 edge handsets, analysts said. The firm said its mobile division will launch new larger-screen phones in the third quarter but may not be able to improve earnings. “I don’t think there’s much to expect from Samsung in the third quarter,” said fund manager Park Jung-hoon at HDC Asset Management. In an effort to see off smaller rivals nipping at its heels in emerging markets, Samsung slimmed down its line of low- and mid-range smartphones last year, and ramped up production of those that remained in a higher-volume, lower-price strategy. Second-quarter profit was 6.9 trillion won, matching the company’s estimate issued earlier this month. “While 2H 2015 is expected to present mounting challenges, the company will try to improve earnings,” Samsung said on Thursday.

The company’s recent slump has stood in stark contrast to the performance of Apple, which has seen profits gain sharply on strong sales of its latest iPhone series. Apple sold 47.5 million iPhones in the quarter, with sales up 85 percent in Greater China where the company’s overall revenue more than doubled to $13 billion.

Thursday’s conference call made no specific mention of further merger plans, as Samsung’s founding Lee family seeks to boost control over the conglomerate ahead of a generational power transfer. This month, the company scraped through a shareholder vote on the proposed merger of two affiliates, after a US hedge fund led an unprecedented investor revolt against the deal. Samsung doubled its interim dividend, but did not comment on potential stock buybacks and hinted that it would not repeat 2014’s “special increase”. Although the anti-merger camp lost the final vote, its muscular campaign marked a watershed moment for shareholder activism in South Korea, where family-run conglomerates, or “chaebol”, like Samsung dominate the economy and are used to running their businesses with minimum investor interference. Investors hoped the company, faced with limited earnings upside in the near term, would use its 61.8 trillion won cash and equivalents to boost the stock price.

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