Samsung sees sluggish smartphone market hurting Q2

Electronics giant predicts 24 percent decline in operating profit due to a slowdown in the smartphone market.

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CNET

A slowdown in smartphone market growth has led Samsung to predict a 24 percent decline in operating profit for the second quarter, its third straight quarterly drop.

The South Korean electronics giant said Monday it expects to record an operating profit of 7.2 trillion won ($7.12 billion) for the quarter ended June 30, a 24.5 percent drop from the year-ago quarter's 9.53 trillion won. The company also said it expects sales for the quarter to come in around 52 trillion won, a 9.4 percent decline.

The guidance, released before its full earnings report later this month, did not provide details of divisional earnings but fell short of the 8.3 trillion won mean estimate of 38 analysts polled by Thomson Reuters.

In an unusual statement labeled "reference material" released with the guidance, Samsung blamed the poor results on increased competition in the Chinese and European markets, leading to higher inventories of medium- and low-end smartphones. The company also said its earnings were hurt by increased price competition and weaker demand for 3G products in China ahead of expected growth of 4G LTE products in that market.

Samsung said sales of its tablets were sluggish during the quarter due to longer replacement cycles compared with that of smartphones. The company also said a strong Korean won versus other currencies such as the US dollar and euro had an effect on earnings.

There were rumblings last month that the South Korean electronics giant's second-quarter financial results might be disappointing. Speaking to reporters on his way to an internal meeting, Samsung CFO Lee Sang Hoon said that Samsung Electronics' second-quarter earnings are "not that good."

Samsung, which typically relies on its smartphone sales for two-thirds of its revenue, and Apple have been under pressure from Chinese handset makers. Both companies saw their share of the market retreat in the first quarter, according to research by Strategy Analytics.

The South Korean electronics giant saw its share of the global smartphone market slip slightly year over year from 32 percent to 31 percent -- its first decline since the fourth quarter of 2009, Strategy Analytics reported. Apple shipped 43.7 million iPhones worldwide to grab 15 percent of the market, a decline from the 17 percent it enjoyed in the year-ago period, according to Strategy Analytics.

The combined market share of the two companies slipped from 50 percent in the first quarter of 2013 to 47 percent in the most recent period thanks to increased competition from second-tier brands such as Huawei and Lenovo, Strategy Analytics said.

 

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