Samsung expects seventh straight profit decline in second quarter

The smartphone giant expects second-quarter operating profit to decline 4 percent and miss analysts' expectations.

Steven Musil Night Editor / News
Steven Musil is the night news editor at CNET News. He's been hooked on tech since learning BASIC in the late '70s. When not cleaning up after his daughter and son, Steven can be found pedaling around the San Francisco Bay Area. Before joining CNET in 2000, Steven spent 10 years at various Bay Area newspapers.
Expertise I have more than 30 years' experience in journalism in the heart of the Silicon Valley.
Steven Musil
2 min read

Samsung had pinned much of its mobile turnaround hopes on its Galaxy S6 line. Juan Garzón/CNET

Samsung Electronics said Monday that it expects its operating profit for the second quarter will miss analysts' expectations as it continues to battle tough competition in the smartphone market.

Operating profit for the three-month period ending June 30 will be 6.9 trillion won ($6.1 billion), a decline of 4.2 percent from the year-ago period, the South Korean electronics giant estimated in a regulatory filing. Samsung's profit estimate fell short of the average analyst estimate of 7.2 trillion won compiled by Bloomberg.

Revenue for the quarter likely will come in at 48 trillion won, compared with analysts' average estimates of 53 trillion won. The guidance, released today ahead of full earnings later this month, did not provide specific divisional results.

The results would represent the seventh straight decline year over year in quarterly profit for Samsung, which had previously posted five consecutive quarters of record profits but which over the past couple years has been struggling as consumers opt for devices from its rivals, such as Apple. Formerly accounting for two-thirds of Samsung's operating profit, smartphone shipments have been providing a smaller part of company's profit in recent quarters, squeezed in emerging markets by low-cost handset vendors such as Xiaomi and Huawei.

The company saw a decline in both smartphone sales and market share during the first quarter of 2015, research firm Gartner reported in May. The Korean electronics giant sold 81.1 million smartphones in the quarter, 4.4 million less than the same period a year ago. The company's market share stood at 24.2 percent, down from 30.4 percent in the first quarter of 2014.

The guidance comes on the heels of a disappointing first quarter, which saw the company's operating profit decline 30 percent and sales fall 12 percent. Samsung had pinned its hopes for a turnaround in the coming quarters on sales of the Galaxy S6 and S6 Edge, the new flagship handsets released to critical acclaim in April.

The two devices feature metal casings instead of Samsung's normal plastic, and the Edge also includes a screen that curves around the sides of the device. Samsung opted to use its own processors in the devices instead of purchasing chips from suppliers, which also should benefit its financial results in coming months.

Despite Samsung mobile chief JK Shin's prediction that the flagship S6 line will set a Samsung record for unit shipments, the Galaxy S6 Edge is expected to be in short supply for the year due both to its expected popularity and to the difficulties in crafting its screen.