Samsung whiffs on earnings thanks to iPhone and Asian rivals

Posted:
in General Discussion edited January 2014
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.
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Comments

  • Reply 1 of 80
    gwmacgwmac Posts: 1,799member
    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.
  • Reply 2 of 80
    haha poor little samscum!
  • Reply 3 of 80
    gtrgtr Posts: 3,231member

  • Reply 4 of 80
    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.
  • Reply 5 of 80

    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!!

  • Reply 6 of 80
    This article is a total farce and sad conclusion to reality. Samsung is the leading android manufacturer with the highest market on the android platform over three years now.

    Nobody who really knows about technology buys iphones only clueless joe's uneducated simpletons in technology buy iphones.
  • Reply 7 of 80

    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.

  • Reply 8 of 80

    REMEMBER, EVERYONE. DON’T REPLY:

     

    You've already reported this item. Thanks for helping to make our community better.

  • Reply 9 of 80
    Quote:

    Originally Posted by richardyarrell View Post



    This article is a total farce and sad conclusion to reality. Samsung is the leading android manufacturer with the highest market on the android platform over three years now.



    Nobody who really knows about technology buys iphones only clueless joe's uneducated simpletons in technology buy iphones.

     

    It's just a matter of preference.  I have a CS degree and have been with Apple since the 3GS.  I love my iphone.

  • Reply 10 of 80
    chris_cachris_ca Posts: 2,543member
    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.

  • Reply 11 of 80
    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?

  • Reply 12 of 80
    Quote:

    Originally Posted by richardyarrell View Post



    This article is a total farce and sad conclusion to reality. Samsung is the leading android manufacturer with the highest market on the android platform over three years now.



    Nobody who really knows about technology buys iphones only clueless joe's uneducated simpletons in technology buy iphones.

    That was the funniest thing I have read all day. Thanks! 

  • Reply 13 of 80
    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.

  • Reply 14 of 80
    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.
  • Reply 15 of 80
    jkichlinejkichline Posts: 1,352member

    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.

  • Reply 16 of 80
    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.

  • Reply 17 of 80
    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."?
  • Reply 18 of 80
    jfc1138jfc1138 Posts: 3,090member
    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. "
  • Reply 19 of 80
    delete..   is there delete button somewhere here??
  • Reply 20 of 80
    bobschlobbobschlob Posts: 1,074member
    Quote:



    Originally Posted by richardyarrell View Post



    Nobody who really knows about technology buys iphones only clueless joe's uneducated simpletons in technology buy iphones.

     

    Ha hahahah! So in other words, you mean "everybody" buys iPhones.

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