Samsung confirms annual profit to drop for 1st time since 2011
Print Edition
GLOBAL smartphone leader Samsung Electronics Co yesterday confirmed expectations for its first annual profit decline since 2011, although a pickup in the fourth quarter hinted that earnings may have stabilized in the short term.
The South Korean tech giant lost market share for three consecutive quarters up to July-September, and analysts say the trend likely continued in the October-December period amid competition from Apple Inc’s new iPhones and cheaper Chinese rivals like Xiaomi Inc.
Still, hopes of healthy memory chip demand and improvements in the mobile business on the back of new mid-to-low tier smartphones are buoying hopes that Samsung has at last stopped the bleeding in quarterly earnings.
“I think the company will show a turnaround,” said CIMB analyst Lee Do-hoon, pointing to the positive outlook for Samsung’s foundry and display panel businesses this year.
Samsung said its fourth-quarter operating profit is likely to be 5.2 trillion won (US$4.74 billion), beating a mean forecast of 5 trillion won from a Thomson Reuters survey of 44 analysts.
The outlook means Samsung’s 2014 profit will probably be 25 trillion won, the weakest in three years, although it marks a rebound from the third-quarter’s 4.1 trillion won profit which was the firm’s lowest quarterly result in more than three years. Samsung is expected to release its annual results around the end of January.
“There were concerns about the mobile division but it looks like the won’s recent weakness against the dollar and the Galaxy Note 4 impact helped,” HMC Investment analyst Greg Roh said, referring to solid sales of Samsung’s latest flagship phone. “I expect profits to continue improving through at least the second quarter of 2015.”
Several analysts tipped the semiconductor division to have earned more than the cash cow mobile business in October-December, buoyed by healthy demand for memory chips from personal computers and smartphones.
The company did not provide a breakdown of its earnings figures in yesterday’s outlook, but a person with direct knowledge of the matter told Reuters that components sales picked up across the board, with healthy demand for memory chips and higher liquid crystal display panel prices.
The mobile division’s contribution to Samsung’s profit has slipped from about 68 percent at its peak in 2013 to about 44 percent in the third quarter, as its high-end offerings lost out to Apple’s iPhones.
Meanwhile buyers in booming emerging markets like China have opted for cheaper devices rather than Samsung’s flagship Galaxy series.
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