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Samsung whiffs on earnings thanks to iPhone and Asian rivals

post #1 of 57
Thread Starter 
Samsung announced earnings on Thursday well below analyst expectations, prompting speculation that Apple's iOS device lineup, along with increased competition from smaller Asian manufacturers, are slowing the Korean tech giant's growth.

Galaxy S4
Samsung's flagship Galaxy S4 handset. | Source: Samsung


As reported by Bloomberg, Samsung's fourth quarter earnings fell short of analyst estimates as the company's hold of the high-end smartphone market eroded with the launch of Apple's iPhone 5s.

Samsung reported net income of 7.22 trillion won, or about $6.7 billion for the three months ending in December. According to the publication's compilation of estimates from 11 analysts, the company was expected to bring in an average of 8.2 trillion won, or $7.6 billion.

Operating income came in at 8.3 trillion won, which represents the firm's first quarter-over-quarter decline since 2011.

The smartphone giant is apparently seeing competition from both sides of the market, analysts said. Apple continues to dominate the high-end with its iPhone lineup, while a burgeoning low end is quickly being saturated by upstart device makers like Lenovo and Huawei. A large portion of Samsung's handset volume is weighted toward the the mid- to low-tier segment, helping the company keep the title of world's largest handset maker.

Adding to the firm's woes is a strengthening South Korean won -- up 2.4 percent against the dollar this past quarter -- which dampened the value of Samsung's income.

"Samsung's two major challenges for 2014 are to maintain its mobile-phone leadership in China and the U.S., while simultaneously growing its tablet business quickly enough to knock Apple iPad from its perch," said Neil Mawston of Strategy Analytics.

Daewoo Securities estimated the Galaxy S4 shipments of 9 million units during the fourth quarter, a number much lower than its December estimate of 13 million units. This compares to 17 million units sold in the third quarter, Daewoo said. By contrast, Apple sold 33.8 million iPhones over the three months ending in October.

As for future products, Samsung is looking to release its next-generation Galaxy S5 in April, which will be paired with a follow-up to the Galaxy Gear smartwatch. Samsung's executive vice president of mobile Lee Young Hee offered the roadmap earlier in January, but failed to elaborate on the company's wearable device plans.

Galaxy Gear


With a so-called "iWatch" expected from Cupertino later this year, Samsung is looking to make inroads in the wearables segment before Apple fields an entry. Initial demand for the first-generation Galaxy Gear was moderate at best, with announced shipments -- not sales -- of 800,000 units over the product's first two months on the market.

Over the past quarter, the Korean firm pushed out a number of smartphone, "phablet" and tablet devices in a variety of screen sizes, while Apple kept its mobile product lineup revisions fairly uniform. Only the iPad Air saw a significant overhaul in terms of chassis size, but even that device carried over the same 9.7-inch display size from last year's model. Comparatively, it seems as though Samsung is aggressively trying to fill every niche it can.

Apple is also rumored to be jumping on the big-screened-device bandwagon, however. A report from The Wall Street Journal on Thursday cited inside sources as saying larger handsets are on tap for 2014, including a 4.5-inch version and a jumbo model with a screen size above 5 inches.

Apple is slated to report its earnings for the quarter ending in December on Jan. 27, at which time iPhone and iPad sales numbers will be revealed.
post #2 of 57
I expect Lenovo to emerge as the biggest Android competitor to Samsung very soon. Once Apple release a larger iPhone as well Samsung is going to be in serious trouble by this time next year.
post #3 of 57
haha poor little samscum!
post #4 of 57

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post #5 of 57
It's telling that Samsung's fortune has changed. People are less and less impressed with the bigger screen size at the expense of quality, decent apps, customer service, and an overall enjoyable experience. Meanwhile Apple is surging ahead for providing what Samsung can't. Nearly 20 billion in advertising can buy Samsung a lot of one-time customers.
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post #6 of 57

Samsung is doomed.  The first QoQ decline after 7 consecutive record quarterly profit.  With only $6.7B in profit last quarter, they would surely have to shut down their shop immediately!  

 

Expect an obituary from our famed spinmeister, Dan Dilger  -- LOL!!

post #7 of 57

This can't be blamed on competition because revenue is actually up slightly from Q3 2013 and up significantly from Q4 2012.  Revenues are perfectly correlated with sales, so sales couldn't have declined unless per-device margins increased.

 

This drop in profits is due to increased expenses.

post #8 of 57
Quote:
Originally Posted by AppleInsider View Post

Samsung reported net income of 7.22 trillion won, or about $6.7 billion for the three months ending in December.

 

That's not right.

They sold 7.22 trillion Android devices.

post #9 of 57
Quote:
Originally Posted by wakefinance View Post
 

This can't be blamed on competition because revenue is actually up slightly from Q3 2013 and up significantly from Q4 2012.  Revenues are perfectly correlated with sales, so sales couldn't have declined unless per-device margins increased.

 

This drop in profits is due to increased expenses.

 

It probably has a lot do to with the fact that the S5 is coming out soon -- Apple sales often peaks in 4Q (or 1Q for Apple); then steadily declines until the next iPhone release.  Samsung's profit is likely to surpass Apple's in 2Q and 3Q this year. 

 

I think it's pointless to sponsor every single major world sports events (eg, the summer / winter Olympics), or buy celebrity endorsement -- though not all of them are bad (eg, Jay-Z bad, LeBron James cool).  Now, I don't think all of Samsung's 2013 marketing budget $13B went into advertising and celebrity endorsements, I heard a large chunk of their marketing expenses pay for rebates, etc, etc.. Anybody know the exact break down?

post #10 of 57
Quote:
Originally Posted by AppleInsider View Post

 
Galaxy Gear
 

 

Is this Galaxy Gear? Where did this picture come from? It definitely isn't a shipped product. All the screw-heads are properly aligned.

post #11 of 57
But... but... but Android has much greater market share so it's really Apple and the iPhone that's doomed. Wall Street is fairly certain that Apple will be lucky to move a few million iPhones in all of 2014 on China Mobile because almost no consumer in China can afford an iPhone. Besides, the Chinese consumer only wants smartphones with a minimum of a 4.7" display and Apple doesn't make an iPhone that size.

/s

I can't wait to see what miracle Samsung is going to create with the Galaxy S5 in order to achieve high sales. The S4 was probably the most feature-laden Android smartphone available last year and if that didn't sell as well as expected it was because consumers didn't need that complex a smartphone and many consumers actually settled for the giveaway Galaxy SIII which was more than satisfactory. Once Apple starts selling a large display iPhone that will be one less advantage the Galaxy S will have over the iPhone.
post #12 of 57

I'm systems architect for 15+ years, serial tech entrepreneur (three successful businesses) and have successful apps on the app store. After years of fiddling with Windows admin and development, I saw the light... Apple makes damn good products on rock solid platforms. Unix + Objective-C. It's so elegant and efficient.

 

So stop you're stupid stereotyping.

 

But then again, you are probably paid to troubleshoot and install anti-virus software on Windows machines all day so switching to Mac would threaten your job security. So quaint.

post #13 of 57
Quote:
Originally Posted by tooltalk View Post
 

 

It probably has a lot do to with the fact that the S5 is coming out soon -- Apple sales often peaks in 4Q (or 1Q for Apple); then steadily declines until the next iPhone release.  Samsung's profit is likely to surpass Apple's in 2Q and 3Q this year. 

 

I think it's pointless to sponsor every single major world sports events (eg, the summer / winter Olympics), or buy celebrity endorsement -- though not all of them are bad (eg, Jay-Z bad, LeBron James cool).  Now, I don't think all of Samsung's 2013 marketing budget $13B went into advertising and celebrity endorsements, I heard a large chunk of their marketing expenses pay for rebates, etc, etc.. Anybody know the exact break down?

 

Again, this isn't due to lower revenues and therefore isn't due to lower sales.  It is due to an increase in expenses.

post #14 of 57
Quote:
Originally Posted by wakefinance View Post
 

 

Again, this isn't due to lower revenues and therefore isn't due to lower sales.  It is due to an increase in expenses.

 

Ah, I see. Bloomberg also reports:

 

" ...  Currency moves cut about 700 billion won from earnings, and the company made bonus payments to workers and boosted marketing as it prepares to release its new S5 high-end device to battle Apple."
post #15 of 57
So that drop is S4 sales was what?

"Daewoo Securities estimated the Galaxy S4 shipments of 9 million units during the fourth quarter, a number much lower than its December estimate of 13 million units. This compares to 17 million units sold in the third quarter, Daewoo said. "
post #16 of 57
Perhaps Samsung smart phone buyers are finally realizing their android phone is a Google spy in their hands seeing and hearing everything they do.
Your can only fool people for a time,
then they wise up to the game.
post #17 of 57
Quote:
Originally Posted by tooltalk View Post
 

 

It probably has a lot do to with the fact that the S5 is coming out soon -- Apple sales often peaks in 4Q (or 1Q for Apple); then steadily declines until the next iPhone release.  Samsung's profit is likely to surpass Apple's in 2Q and 3Q this year. 

 

I think it's pointless to sponsor every single major world sports events (eg, the summer / winter Olympics), or buy celebrity endorsement -- though not all of them are bad (eg, Jay-Z bad, LeBron James cool).  Now, I don't think all of Samsung's 2013 marketing budget $13B went into advertising and celebrity endorsements, I heard a large chunk of their marketing expenses pay for rebates, etc, etc.. Anybody know the exact break down?

So, I'm guessing that either the bulk of the $13B was wasted, or the soon to be much more frugal Samsung is going to see a dip in sales and marketshare. Either way, I don't think that the S5 is going to save them, whenever it arrives. Chalk that up to low and mid range competition that will reduce ASP.

 

Samsung has peaked marketshare. Profits will soon follow. Such is the way of capitalism.

post #18 of 57
Quote:
Originally Posted by wakefinance View Post

This can't be blamed on competition because revenue is actually up slightly from Q3 2013 and up significantly from Q4 2012.  Revenues are perfectly correlated with sales, so sales couldn't have declined unless per-device margins increased.

This drop in profits is due to increased expenses.
Did you even read the report? Sales were up only 0.3% from Q3. And this is a holiday quarter, the best time of year for a consumer electronics company.

Reading further, consumer electronics was up 18%, but mobile was down 9%.

Seems pretty clear. Samsung sold more electronics goods, but less mobile. And considering Samsung claims a significant increase in tablet sales it can only mean phone sales dropped even more than 9%.

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post #19 of 57
Quote:
Originally Posted by EricTheHalfBee View Post


Did you even read the report? Sales were up only 0.3% from Q3. And this is a holiday quarter, the best time of year for a consumer electronics company.

Reading further, consumer electronics was up 18%, but mobile was down 9%.

Seems pretty clear. Samsung sold more electronics goods, but less mobile. And considering Samsung claims a significant increase in tablet sales it can only mean phone sales dropped even more than 9%.

 

So, just to be clear, you don't disagree with me?  Samsung's earnings didn't decrease because of a decrease in sales?  Good, I'm glad we're on the same page.

post #20 of 57
Quote:
Originally Posted by tooltalk View Post

It probably has a lot do to with the fact that the S5 is coming out soon -- Apple sales often peaks in 4Q (or 1Q for Apple); then steadily declines until the next iPhone release.  Samsung's profit is likely to surpass Apple's in 2Q and 3Q this year. 

I think it's pointless to sponsor every single major world sports events (eg, the summer / winter Olympics), or buy celebrity endorsement -- though not all of them are bad (eg, Jay-Z bad, LeBron James cool).  Now, I don't think all of
Samsung's 2013 marketing budget $13B went into advertising and celebrity endorsements, I heard a large chunk of their marketing expenses pay for rebates, etc, etc.. Anybody know the exact break down?

Sooo... it has a lot to do with the S5 coming out? I'd say it had a lot to do with Samsung being unable to peak during the huge Holiday buying frenzy.

Of course there's no breakdown of their advertizing budget, that's where they hide all the bribes and payouts to shills haunting the Apple-cetric blogs. Samsung may be unethical, corrupt and operated by a criminal, but it ain't stupid.
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post #21 of 57
Quote:
Originally Posted by jkichline View Post

I'm systems architect for 15+ years, serial tech entrepreneur (three successful businesses) and have successful apps on the app store. After years of fiddling with Windows admin and development, I saw the light... Apple makes damn good products on rock solid platforms. Unix + Objective-C. It's so elegant and efficient.

So stop you're stupid stereotyping.

But then again, you are probably paid to troubleshoot and install anti-virus software on Windows machines all day so switching to Mac would threaten your job security. So quaint.

Were you mumbling to yourself or was these comments directed toward someone??
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post #22 of 57

AI's spin on this story differs significantly from the rest of the tech press. It's worth hearing this story from all sides.

post #23 of 57
Quote:
Originally Posted by wakefinance View Post
 

 

So, just to be clear, you don't disagree with me?  Samsung's earnings didn't decrease because of a decrease in sales?  Good, I'm glad we're on the same page.

 

He's saying Samsung's mobile phone sales *decreased*, but overall revenue was propped up by other electronics sales.

 

Increase in marketing expense and holiday shopping should have boosted their mobile phone sales too. Apparently, they didn't help much against low cost alternatives and Apple's new phones.

post #24 of 57
Quote:
Originally Posted by RichL View Post
 

AI's spin on this story differs significantly from the rest of the tech press. It's worth hearing this story from all sides.

 

According to Samsung...

"marketing costs and "year-end inventory adjustments" _lowered shipments_ and cut into profits."

 

​This implies that they had overshipped previously. And before the shopping season, retailers want stagnant products out of their shelves to replace with newer SKUs. This stock rebalancing act means the resellers effectively bought fewer new Samsung phones (The rest were treated as replacements for unsold SKUs). 

 

It is easy to claim demand has increased. Next quarter, Samsung will try to overship again to make up for the "loss in momentum". This is a common phenomenon for companies who stuff the channel aggressively. A few quarters down, they will report another setback again as the channel readjust its inventory another time. This was the game the old Sony played. Kaz Hirai finally got rid of the practice because the channel stuffing game almost brought the electronics division to its knees -- if the prices erode quickly, and currency rate fluctuate. Same things that are happening to Samsung the last quarter and now.

You can already tell the impact of the negative effect since a holiday quarter usually sell 2-3 times a regular quarter. Yet Samsung's profitability dipped instead of increased. That means they had a lot of unsold inventory. When they release S5, these unsold S4, Note, etc. will need to be marked down too. That's why in the last quarter, you see a few Samsung executives fined for trying to prop up their online phone price. They were basically fighting their own system because these poor managers have revenue targets to meet.

 

As for marketing cost, they will continue to fund the channels, but perhaps more selectively.

 

EDIT: Forgot to mention that in India, because Apple phased out iPhone 4 last quarter, Samsung were able to capture more marketshare at the low end. This has helped them slightly. But not enough to stop the drop in profit because the margin for these low end phones are too low.


Edited by patsu - 1/24/14 at 12:56am
post #25 of 57
Quote:
Originally Posted by JoshA View Post

Perhaps Samsung smart phone buyers are finally realizing their android phone is a Google spy in their hands seeing and hearing everything they do.
Your can only fool people for a time,
then they wise up to the game.


Better be careful with that line of attack unless someone asks the question how could the NSA intercept shipments of iPhones destined for particular individuals and install their spyware on them then pop them back into the shipping process so the altered phone reached the targeted individual?  To do that you would almost think you would have to be running Apple or something.

post #26 of 57
Quote:
Originally Posted by cnocbui View Post
 


Better be careful with that line of attack unless someone asks the question how could the NSA intercept shipments of iPhones destined for particular individuals and install their spyware on them then pop them back into the shipping process so the altered phone reached the targeted individual?  To do that you would almost think you would have to be running Apple or something.

 

You "only" need to control the shipper and jailbreak the phone. You'll need physical access to the phone (Hence, the need to temper with the shipping process). And it's not just iPhone. All phones are vulnerable to this. If NSA runs Apple, they don't even need to bother the shipper.

 

But Android phones are more vulnerable to malware (which will include hacking attempts remotely).

post #27 of 57
They may not be "doomed" but there is a big difference between the kind of principles that lead to success in the long run and the kind that lead to success only in the short run (e.g. designing your own products, which means you eventually get really good at it, vs. just copying someone else's).
post #28 of 57
Quote:
Originally Posted by wakefinance View Post
 

This can't be blamed on competition because revenue is actually up slightly from Q3 2013 and up significantly from Q4 2012.  Revenues are perfectly correlated with sales, so sales couldn't have declined unless per-device margins increased.

 

This drop in profits is due to increased expenses.

 

Samsung's revenue includes Consumer Electronics department (domestic electronics, like TV), which contributed to that "slightly up revenue". Samsung's Mobile department dropped 9% in revenue and 18% in profit QoQ. 

 


Edited by xSnow - 1/24/14 at 6:02am
post #29 of 57
Quote:
Originally Posted by cnocbui View Post
 


Better be careful with that line of attack unless someone asks the question how could the NSA intercept shipments of iPhones destined for particular individuals and install their spyware on them then pop them back into the shipping process so the altered phone reached the targeted individual?  To do that you would almost think you would have to be running Apple or something.

 

Wow.

 

You can almost smell the desperation.

 

:no:
 

post #30 of 57
Quote:
Originally Posted by Constable Odo View Post

But... but... but Android has much greater market share so it's really Apple and the iPhone that's doomed. Wall Street is fairly certain that Apple will be lucky to move a few million iPhones in all of 2014 on China Mobile because almost no consumer in China can afford an iPhone. Besides, the Chinese consumer only wants smartphones with a minimum of a 4.7" display and Apple doesn't make an iPhone that size.

/s

I can't wait to see what miracle Samsung is going to create with the Galaxy S5 in order to achieve high sales. The S4 was probably the most feature-laden Android smartphone available last year and if that didn't sell as well as expected it was because consumers didn't need that complex a smartphone and many consumers actually settled for the giveaway Galaxy SIII which was more than satisfactory. Once Apple starts selling a large display iPhone that will be one less advantage the Galaxy S will have over the iPhone.

 

Apple is outselling Samsung's large screen phones, the fall in profit indicates people who choose Samsung phones are buying their cheaper, smaller screened models.

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post #31 of 57
Quote:
Originally Posted by wakefinance View Post

This can't be blamed on competition because revenue is actually up slightly from Q3 2013 and up significantly from Q4 2012.  Revenues are perfectly correlated with sales, so sales couldn't have declined unless per-device margins increased.

This drop in profits is due to increased expenses.

Not sure what figures ur referencing. Samsung's Mobile department dropped 9% in revenue and 18% in profit year over year. If ur a big enough fan of samsung that you're referencing a division larger than mobile, you should probably start reading refrigerator insider and microwave insider as well.
Edited by daveinpublic - 1/24/14 at 5:09am
post #32 of 57
Quote:
Originally Posted by xSnow View Post
 

 

Samsung's revenue includes Consumer Electronics department (domestic electronics, like TV), which contributed to that "slightly up revenue". Samsung's Mobile department dropped 9% in revenue and 18% in profit year over year. 

 

 

@Daveinpublic: 

 
That's QoQ, not YoY.   Samsung's IM quarterly sales is up by about +9% and profit pretty much the same YoY. Their IM annual sales/profit is up by about +30% YoY.
 
IM sales  (9% gain)
4Q 2012  30.71
4Q 2013  33.89
 
IM profit  (0% no change)
4Q 2012   5.47
4Q 2013   5.47 
 
Now, according to Bloomberg and theVerge, (1) worker bonus (700B KW) and (2) higher Korean Won (800B KW) are mainly to blame for higher expenses during the 4th quarter.  That explains 1500B KW of the 1850B KW QoQ decline (but yes Mobile's sales is still down by 9% QoQ).

Edited by tooltalk - 1/24/14 at 6:18am
post #33 of 57
Quote:
Originally Posted by tooltalk View Post
 

 

@Daveinpublic: 

 

That is right.  

Still, Samsung's Mobile department dropped 9% in revenue and 18% in profit QoQ.  

post #34 of 57
Quote:
Originally Posted by tooltalk View Post
 

 

It probably has a lot do to with the fact that the S5 is coming out soon -- Apple sales often peaks in 4Q (or 1Q for Apple); then steadily declines until the next iPhone release.  Samsung's profit is likely to surpass Apple's in 2Q and 3Q this year. 

 

I think it's pointless to sponsor every single major world sports events (eg, the summer / winter Olympics), or buy celebrity endorsement -- though not all of them are bad (eg, Jay-Z bad, LeBron James cool).  Now, I don't think all of Samsung's 2013 marketing budget $13B went into advertising and celebrity endorsements, I heard a large chunk of their marketing expenses pay for rebates, etc, etc.. Anybody know the exact break down?

Yes, a large chunk went into the government bribe slush fund and the rest was used to pay astroturfing South Korean high school student.

post #35 of 57

They are still up YoY, QoQ is meaningless.  That being said they are getting hit by the Nexus phones and tablets as more and more consumers wants pure Android, easy upgrades and no bloatware.

 

Must be fun to compete in a market where you're OS maker is dumping hardware at cost, enjoy...

post #36 of 57
Quote:
Originally Posted by Rayz View Post

Wow.

You can almost smell the desperation.

1oyvey.gif

 

And I'm here checking under my shoes. lol.gif
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post #37 of 57
Quote:
Originally Posted by herbapou View Post
 

They are still up YoY, QoQ is meaningless.  That being said they are getting hit by the Nexus phones and tablets as more and more consumers wants pure Android, easy upgrades and no bloatware.

 

Must be fun to compete in a market where you're OS maker is dumping hardware at cost, enjoy...


Indeed I bought a Nexus over an S4 because of how filled with crap it was. It's a great market for the consumer at the moment. Sony, Asus, LG et al are all viable competitors and are also trying to explore new markets
.

post #38 of 57

So Samsung's lunch is being eat from the bottom, like they could not see that coming. This is the problem in the market place, when you are trying to ship the most cheap stuff there is always someone who can go even lower than you. In Apple case when you only interested in the premium market place its hard to a competitor to come in and eat your lunch.

 

In the case of Samsung they are trying to compete in both markets and getting beat from above and below. they being squeezed on both sides. They can not make enough on the high end to allow them to give away the cheap stuff and fend off their no overhead competitors.


Edited by Maestro64 - 1/24/14 at 1:05pm
post #39 of 57
Quote:
Originally Posted by Rayz View Post

Wow.

You can almost smell the desperation.

1oyvey.gif

 

Is that what that was? I thought someone ate bad cheese and farted. 1smile.gif

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post #40 of 57

This is wonderful news. Truly.

 

A race to the bottom is usually a very expensive game. Good luck Samsung.

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