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Samsung smartphone sales show signs of recovery

The South Korean electronics giant says 'significant' increase in sales offset by price cuts in flagship handsets.

Samsung reported a "significant increase" in smartphone sales compared with the previous quarter.
Sarah Tew/CNET

Samsung appears to be putting its smartphone sales woes behind it.

The last two years have been rough on Samsung, which makes some of the most popular smartphones in the world but hasn't managed lately to scoop up the same profits as competitor Apple, whose iPhones remain the benchmark for the industry.

Part of Samsung's problem is that it faces tougher competition than just Apple. That's because Samsung devices run Google's Android mobile operating system, which is available on devices made by a host of hardware makers.

The prevalence of Android handsets means Samsung is fighting on two fronts. HTC and LG, as well as low-cost handset makers Huawei, Xiaomi and Micromax, battle for the Android customers. That means there's more competition for first-time buyers, who are drawn by lower price points.

Meanwhile, Apple is grabbing the high end of the market, as well as angling for customers who want the big-screen phones Samsung had used to differentiate itself. Last year, Apple introduced the iPhone 6 and 6 Plus, which it recently updated. Those phones are powering Apple's profits.

Samsung is trying to address the problem. In April, It introduced the high-end and well-reviewed Galaxy S6 and S6 Edge, flagship handsets made of premium materials, something consumers have requested for years.

On Thursday, Samsung showed the process is ongoing. Samsung reported an 82 percent rise in operating profit, snapping a streak of seven consecutive quarterly profit declines, even though revenue from its mobile division was largely flat.

Samsung reported third-quarter operating profit of 7.39 trillion won, or $6.45 billion, on revenue of 51.68 trillion won. Samsung, which doesn't release smartphone shipment numbers, said it saw a "significant increase" in smartphone shipments but that revenue was hurt by price cuts for its Galaxy S6 and S6 Edge and shipments of low- to midrange smartphones.

The mobile division's profit increased by about 33 percent, providing about a third of total operating profit in the quarter but sharply lower than the two-thirds it's provided in the past. Meanwhile, profits doubled at the division housing Samsung's chip and display businesses.

Still, Samsung indicated the good times were unlikely to last. It forecast profits would fall in the fourth quarter and initiated a share buyback.

To get a leg up on its competition, Samsung has reportedly moved up the launch date of its next flagship smartphone, the Galaxy S7, to January. The move would break Samsung's tradition of introducing new flagship smartphones at major global tech conferences, such as Mobile World Congress in Barcelona. But it might also give it an opportunity to undercut sales of the iPhone 6S, which launched in August, by getting it into consumers' hands sooner.

Samsung is also hoping to get a boost from Samsung Pay, its mobile payments service that went live last month in the US. The service lets customers pay for goods and services using their smartphones or Gear 2 smartwatch. As with Apple Pay, the competing service launched last year by Apple, the goal of the feature is to build customer loyalty amid the fierce fight for smartphone customers.