Samsung Profits Hurt by Smartphone Price Declines

30 Jul 2015 | Author: | No comments yet »

Samsung Earnings Miss Estimates as Galaxy S6 Disappoints.

Net income for the three-months ended June 30 was at 5.75 trillion Korean won ($4.9 billion), down from 6.25 trillion won in the year-ago period, the company said in a statement Thursday.Samsung Electronics Co.’s second-quarter profit missed analysts’ estimates after misfiring on its Galaxy S6 sales strategy and losing ground in emerging markets to Chinese smartphone brands. The decline was the fifth straight quarter to post 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 midrange smartphone models.

It was expected that Samsung would be unveiling its next Galaxy smartphones – the much-rumoured Note 5 and the S6 Edge Plus – in September at IFA. Analysts estimate the average selling price for Samsung’s smartphones to have dropped by more than 10% to below $300 in the latest quarter compared with a year ago, in tandem with heightened cost competition from low-cost rivals in the region. According to a Wall Street Journal report citing “people familiar with the matter”, Samsung could also be taking the covers off of its next-generation smartwatch, although there is a disclaimer that a “final decision still hasn’t been made.” The Samsung Gear A, apparently labelled the Orbis internally, has been doing the rounds on the web rumour mill for the past few months, and is expected to shun Google’s Android Wear OS in favour of the Korean giant’s own Tizen platform. “This is our first time to include the Tizen Native APIs so now you can build both Web applications and Native applications for the Next Gear,” read the notes with the release. Samsung’s smartphones are expected to stay prone to further price cuts as the South Korean electronics giant struggles to differentiate its products from the growing pool of competing smartphone models.

Samsung misread demand for the S6 smartphone lineup released in April, failing to produce enough curved screens for the popular Edge model while the traditional model struggled to challenge Apple Inc.’s bigger iPhones. In an attempt to cushion the continuing slide in earnings, Samsung has advanced the timing for the launch of its flagship smartphone/tablet hybrid device, likely called the Galaxy Note 5, by about three weeks from its usual launch period. The SDK details how it can be programmed for a wide range of navigation options including scrolling, zooming and adjusting levels such as volumes and brightness. Bernstein, said before the earnings release. “For the second half, Samsung will release new products that will help a bit, but profits in mobile might be at risk if those don’t sell well.” Shares of Samsung fell 0.4 percent to 1,248,000 won as of 9:02 a.m. in Seoul.

The world’s biggest smartphone maker saw its share in China slide to 8.6 percent in the second quarter from 9.8 percent in the first quarter, according to IHS. Xiaomi had 18.2 percent, followed by Huawei’s 16.2 percent and Apple’s 11.6 percent. “China is becoming a problem child for Samsung that it needs to fix,” said Neil Mawston, executive director of the research firm Strategy Analytics. Samsung will sell 40 million units of the S6 models this year, compared with an earlier projection of 43 million, said Lee Jae Yun, an analyst at Yuanta Securities Korea Co. The WSJ story suggests the smartwatch will boats “a limited form of Samsung’s payment software…allowing users to tap the watch to pay for public transit rides.” Samsung Pay was announced back in March and aims to take on its Apple namesake rival. “Samsung Pay will reinvent how people pay for goods and services and transform how they use their smartphones,” said Samsung CEO JK Shin. “The secure and simple payment process, coupled with our robust partner network, makes Samsung Pay a truly game-changing service that will bring value to consumers and our partners in the ecosystem.” Samsung this week announced it would hold a “Galaxy Unpacked” event on Aug. 13, with the company due to unveil its next Note device and a larger S6 Edge.

Profit at Samsung’s semiconductor business, which makes memory chips and applications processors, was 3.4 trillion won, compared with 1.86 trillion won a year earlier.

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