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Samsung Electronics warned Tuesday that its third-quarter earnings would fall below market expectations, amid heightened competition in the smartphone market, decreased shipments of displays and falling TV prices.

The company said it would report an operating profit of $3.8 billion for the quarter ending in September — a decline of nearly 60 percent from the same time a year earlier. Sales fell to $44 billion, off 20 percent from a year ago.

The preliminary guidance, which Samsung issued ahead of its quarterly report, due later this month, failed to meet the $5.2 billion average profit estimate of 43 analysts pulled by Thomson Reuters.

The South Korean electronics giant said that while smartphone shipments increased, its operating margins fell because of higher marketing costs, fewer shipments of high-end phones and a lower average selling price for the devices.

The company said it is responding with a new smartphone lineup that will include new midrange and low-end devices, which would make Samsung’s products more competitive in markets such as China.

Samsung had hoped to revitalize its phone business in September with the introduction of new models. It said it “cautiously expects” smartphone shipments to grow in the fourth quarter.

The display business suffered in the third quarter amid weaker demand for mobile products.

Samsung’s consumer electronics unit experienced seasonal weakness in the quarter, because of lower prices for TVs and an “earlier than expected” end to the summer sales season of home appliances.

The company’s memory business improved, with strong demand from personal computers and servers. The company said prices have stabilized as supply has tightened.



3 comments
jameskatt
jameskatt

Samsung spent $14 BILLION in 2013 in marketing its smartphones.


Apple in comparison spent about $1.2 billion in marketing in 2013. Apple spends very little of its income on marketing.


By focusing more on the low and middle end of the market, Samsung is guaranteed to earn even less as it races to the bottom like PC Makers did.


The problem for Samsung is that there is NO profit in the low end of the market.  Samsung is also being outcompeted in the low end by Asian tigers such as Xiaomi who don't care much for profits. They are willing to live in razor thin profit margins and even more than Samsung, copy Apple slavishly.


Already, Samsung is being beaten at the low end of the market in India and China - two of the world's most populous countries.  Samsung is also dead in Japan for cultural reasons.


And in the US and the rest of the world,  Samsung is being destroyed by Apple at the top end of the market. If you combine the First weekend sales in the world plus the initial weekend sales in China, the iPhone is going to sell over 15 MILLION phones, with pre-sales of the iPhone 6 in China topping 4 million.


Samsung also belatedly realized - unlike its competitors - that the TV market is saturated and is not so hot.



komocode
komocode

 "operating margins fell because of higher marketing costs,"


so...stop making hundreds of pointless ads mocking the iPhone and focus on your own product?

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