Tags: Samsung | Profit | Handset | Sales

Samsung Profit Falls Short as High-End Handset Sales Slow

Monday, 06 January 2014 07:06 PM

Samsung Electronics Co. posted fourth-quarter earnings that missed analysts’ estimates as demand for high-end smartphones slowed because of market saturation and competition from Apple Inc.’s newest iPhones.

Operating profit was 8.3 trillion won ($7.8 billion) in the three months ended December, the Suwon, South Korea-based company said in a statement Tuesday. That compares with the 10 trillion-won average of 32 analyst estimates compiled by Bloomberg.

Slowing growth for the most profitable segment of the smartphone market is pushing down average selling prices, with some Chinese makers selling handsets for as low as $100. The trend is hitting prices for Samsung’s panels and crimping display-unit earnings, prompting Asia’s biggest technology company to try to capitalize on higher prices for memory chips.

“The overall smartphone market weight is now sliding toward the $300 segment from the above-$500, ultra-high end category,” Ahn Seong Ho, a Seoul-based analyst at Hanwha Investment & Securities Co., said before the earnings release. “The issue all comes back to smartphones.”

The average estimate for Samsung’s operating profit income fell by 534 billion won, or about 5 percent, in the past month as analysts scaled back projections for high-end smartphones.

Sales were about 59 trillion won in the quarter, the company said Tuesday. That compares with the 61.5 trillion-won average of 36 estimates.

Samsung didn’t provide net income or details of divisional earnings, with audited results due to be reported later this month.

Shares of Samsung rose 0.9 percent to 1,307,000 won in Seoul trading Monday. The stock dropped 9.9 percent last year, its first annual decline since 2008.

Fourth-quarter operating profit at the mobile unit, the company’s biggest contributor to earnings, was 6.4 trillion won, according to the median estimate of six analysts surveyed by Bloomberg News. Sales rose 19 percent, according to the analyst survey.

In the third quarter, the mobile unit posted record operating profit of 6.7 trillion won, the company said Oct. 25.

Samsung shipped 91 million smartphones in the fourth quarter, up 4 percent from the previous quarter, according to an estimate by KB Investment & Securities Co. In the third quarter, it was estimated to have shipped 87.3 million devices.

S4 Slows

The company, the biggest seller of smartphones in China, faces new competition in the world’s largest handset market after Apple last month struck a distribution deal with China Mobile Ltd., the biggest carrier by users. Some Chinese manufacturers sell smartphones for as little as $100.

“The latest China Mobile-Apple deal, as well as upcoming bigger-sized iPhones, will start to intrude on Samsung’s product portfolio and could steal some of its share away,” LIG’s Hong said. “The smartphone market will get more heat this year, and that raises a concern.”

Shipments of Samsung’s Galaxy S4, which hit shelves in April, fell to 13 million units in the fourth quarter from 17 million in the previous three months, Daewoo Securities Co. said in a Dec. 23 report.

Samsung also is facing competition in the market for lower- end devices as smaller rivals introduce cheap handsets with more advanced features and functions.

Global industry smartphone shipments will more than double to 1.7 billion units by 2017, researcher IDC said in a Nov. 26 report. During the same period, the average selling price will fall to $265 from $337.

New IPhones

Apple, which released its new iPhones on Sept. 20, will start to sell the 5s and 5c models through China Mobile outlets from Jan. 17, the companies said last month.

Samsung’s billionaire Chairman Lee Kun Hee last week urged workers to innovate and adopt new ways of thinking to move beyond their focus on hardware and maintain growth.

Samsung is expanding into wearable devices and introducing new smartphones, including models with a curved screen and a clamshell design. Last year, it released the Galaxy Gear smartwatch to challenge Sony Corp. and Google Inc. in wearables.

The company may release a Galaxy smartphone this year with a three-sided display that wraps around the edges so messages can be read from an angle, two people familiar with the plans said in November.

Display Unit

Samsung’s display division, which dominates the market for organic light-emitting diode screens used in its own smartphones and TV sets, probably had operating profit of 726 billion won in the fourth quarter, down 4 percent from a year earlier, according to the Bloomberg News survey.

Sales at the unit were probably little changed at 7.9 trillion won, according to the six analysts surveyed.

Increased spending on a research and development of flexible displays and continued sluggish demand for TVs probably crimped earnings at the unit, Lee Min Hee, a Seoul-based analyst at I’M Investment & Securities Co., said before the announcement.

Operating profit at Samsung’s consumer-electronics division, which oversees the TV and home-appliance businesses, probably fell to 418 billion won from 700 billion won a year earlier, according to the analyst survey.

Global TV demand fell to 226.7 million units in 2013, down from 238.2 million units in 2012, according to IHS Inc., a global research company based in Englewood, Colorado. In 2014, demand will rebound to 229 million units, it said.

Chip Prices

Samsung will release its first TV set with a bendable screen this year, it said at the International Consumer Electronics Show in Las Vegas Tuesday.

Profit at Samsung’s chip division, which supplies its own handsets and those made by Apple, nearly doubled to 2.6 trillion won on sales of 11 trillion won, according to the Bloomberg News survey of analyst estimates.

A September fire at an SK Hynix Inc. factory in Wuxi, China, triggered a spike in chip prices, which remain near three-year highs.

The price of the benchmark DDR3 2-gigabit dynamic random- access memory chip reached $2.54 on Dec. 31, according to DRAMeXchange, Asia’s largest market for the components. That compares with $1.60 on Sept. 4, when the fire hit Hynix’s factory.

“The global, memory-chip industry will stage a stable profit growth in 2014 with the tight supply-demand condition, which is expected to offset any profit slowdown from its mobile business,” said Pak Yuak, a Seoul-based analyst at Meritz Securities Co.

© Copyright 2018 Bloomberg News. All rights reserved.

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Samsung Electronics posted fourth-quarter earnings that missed analysts' estimates as demand for high-end smartphones slowed because of market saturation and competition from Apple Inc.'s newest iPhones.
Monday, 06 January 2014 07:06 PM
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