Apple's iPhone6 drags Samsung profits down

Apple's iPhone6 drags Samsung profits down

Thursday, October 30, 2014 8:09 am



Samsung reported its smallest quarterly profit in nearly three years Thursday as its key smartphone business faltered under competition from Apple’s iPhone6 and Chinese handset makers in an increasingly saturated market.

Net profit for the South Korean electronics giant amounted to 4.22 trillion won ($4 billion) for July to September, marking a dramatic fall of 48.8 percent from a year ago, and the lowest figure since the fourth quarter of 2011.

Operating profit also dropped 60 percent from a year ago to 4.06 trillion won, while sales tumbled about 20 percent to 47.4 trillion won, Samsung said in a statement.

The firm’s mobile phone unit reported operating profit of 1.75 trillion won in the third quarter, a dramatic decline from 6.7 trillion won a year ago.

Samsung has a diverse product line ranging from memory chips to home appliances, but it’s the mobile division that had driven the company’s record profit surge of recent years.

The current slump was starkly reflected in the fact that the mobile unit’s operating profit in the third quarter accounted for 43 percent of the company’s total, compared to 76 percent just six months ago.

Despite a slight increase in unit sales volume, actual sales revenue tumbled to 24.6 trillion won from 36.6 trillion won.

– Falling margins –

“The average selling price of smartphones declined due to an increased share of middle- to low-end smartphone sales and price reductions of existing smartphone models,” the company said.

The third-quarter performance by the world’s largest manufacturer of smartphones and televisions followed a 20 percent drop in profit in the second quarter.

Despite the slump, Samsung’s share price closed 4.51 percent higher Thursday at 1.18 million won on expectations of potential dividend payout.

Robert Yi, Samsung’s head of investor relations, said the firm was considering some form of “shareholder return” next year and would make a final announcement in the fourth quarter.

The latest edition of Samsung’s previously all-conquering Galaxy S smartphone met with a lukewarm response on its launch in April.

It was also forced to introduce the new edition of the oversized smartphone Galaxy Note earlier than scheduled in September as the latest iPhone6 from US rival Apple enjoyed better-than-expected demand.

Samsung initially pioneered the market for “phablet” devices — sized between a smartphone and a tablet computer — when it introduced the Galaxy Note series in 2011.

But the firm has come under pressure with the release of the iPhone 6 Plus, which also boasts a large screen.

– China challenge –

And in the low- to mid-range smartphone segment, Samsung has faced a growing challenge from Chinese firms nipping at its heels in key emerging markets including China.

Samsung saw its leading share in the global smartphone market slip to 25.2 percent in the second quarter of this year from 32.6 percent a year ago.

At the same time, Chinese firms — Huawei, Lenovo Xiaomi — saw their combined share rise to 17.3 percent from 11.4 percent, according to market research firm Strategy Analytics.

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