Sony, Samsung Find Strength in Sales of Components

30 Jul 2015 | Author: | No comments yet »

Samsung cautious on outlook as smartphone market growth slows.

Samsung Electronics on Thursday offered a downbeat outlook for the second half of the year as smartphone market growth slows and ahead of the expected release of new iPhones from arch rival Apple Inc.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.

Samsung experienced “supply difficulties from higher-than-expected market demand for the Galaxy S6 Edge,” the company said in a statement released alongside their second quarter financial results. The world’s largest smartphone maker said net profit for the April-June period stood at 5.75 trillion won ($4.9 billion), down from 6.25 trillion won a year ago and slightly below analyst estimates. 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. 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. And it’s looking to other parts of its business, such as semiconductors, display panels, smart TVs, and health equipment, to help make up for lost mobile sales.

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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