Samsung predicts massive profit decline, blames slumping smartphone sales

Posted:
in General Discussion edited July 2014
South Korean electronics giant Samsung on Tuesday warned investors that it is set to announce a quarterly profit decline of as much as 26 percent year-over-year, citing weak smartphone demand and increased competition in China and Europe as the shortfall's primary drivers.

Purported photos of Samsung's new Galaxy F
Purported photos of Samsung's new Galaxy F "premium" smartphone


The company expects to have added between 7 trillion and 7.4 trillion Won ($6.9 billion to $7.3 billion) to its coffers in the second quarter, compared with 9.5 trillion Won one year ago. It will mark Samsung's third consecutive quarter of sliding profits.

Along with the relative strength of the Won against other world currencies, Samsung specifically cited trouble in its IT and mobile communications division -- the unit that handles the company's handset and tablet business -- as the culprit.

Samsung was forced to spend "somewhat aggressively" on marketing in order to clear backed-up inventory of mid-tier and low-end devices as it feels the squeeze from commodity Android vendors. That position is not likely to improve in the near future, especially as new initiatives like Google's Android One program expand the availability of ultra-low-cost Android devices with more than modest technical specifications.

There is worry among industry watchers that Samsung's flagship devices -- including the new Galaxy S5 -- could be suffering from similar channel-stuffing issues, according to the Wall Street Journal. Combined with Samsung's assertion that demand for its 5-inch and 6-inch devices cannibalized tablet sales, the numbers paint a bleak picture of the company's future ahead of arch rival Apple's hotly-anticipated release of competing 4.7-inch and 5.5-inch next-generation iPhones this fall.

The handset division's troubles also dragged other Samsung business units down, the company said. Samsung's System LSI and display businesses -- which supply both Samsung and rivals, including Apple, with system components -- saw profits fall amid lowered shipments.
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Comments

  • Reply 1 of 176
    gatorguygatorguy Posts: 20,033member
    IIRC they offered a similar warning about three weeks ago. What a shame. /s
  • Reply 2 of 176
    bobbyfozzbobbyfozz Posts: 97member

    Their dishonesty in marketing is NOT helping them.

  • Reply 3 of 176
    mr. memr. me Posts: 3,219member
    I wouldn't worry about Samsung. As soon as Apple releases "The Next Big Thing," Samsung will have something new to copy.
  • Reply 4 of 176
    andysolandysol Posts: 2,506member
    Haha

    Still profiting decent numbers. And if I'm not mistaken, only the chips are now purchased from Samsung- with all screens coming from other places. Let's hope the A8 is the year of no samsung to hurt them even further.

    As an aside- do we now know why Apple never got into the dirt-cheap market? Because there's no money in it, and plenty of backlog. How does Apple get rid of existing inventory? Keeps it's phone around for 3 years while dropping the price- and not even having to advertise. So supply lines [I]do[/I] play a major role. The key to being a CEO or any business owner for that matter is to put people in the right positions to succeed.

    Cook is the right man for the job. No doubt.
  • Reply 5 of 176
    thewhitefalconthewhitefalcon Posts: 4,453member
    People are realizing that Scamscum doesn't build quality products. Shocker.
  • Reply 6 of 176
    danielswdanielsw Posts: 905member
    Oooo, that's so unfair! Seems copying really isn't a viable alternative to innovation. Who knew? Answer: Apple.
  • Reply 7 of 176
    thewhitefalconthewhitefalcon Posts: 4,453member
    Quote:

    Originally Posted by sog35 View PostThe Galaxy S5 has been an utter disaster.  They are selling 25% less S5's than S4's even with massive discounts and buy one get one free offers.  .

     

    I knew something was up when the phone launched with BOGO offers. That's not something you do if you expect it to sell well.

  • Reply 8 of 176
    leavingthebiggleavingthebigg Posts: 1,115member
    Over on Quartz, the site is working extraordinarily hard to portray Samsung's profit decline as an omen for Apple. This tactic has been pursued before as Samsung purposely lied about great sales when it knew it was channel stuffing. Even when the truth is revealed about Samsung's lies, people are still trying to find ways to spin the lies.

    Quartz ended its article with a section titled, "On the bright side..." The section was about the $36 million theft of Samsung products and the employees held hostage. Is that really a bright side?
  • Reply 9 of 176
    leavingthebiggleavingthebigg Posts: 1,115member
    I knew something was up when the phone launched with BOGO offers. That's not something you do if you expect it to sell well.

    I read Samsung was stating the S5 was its fastest selling smartphone ever. I will get article's link then post it here. No publication is questioning the lies. They are just accepting the lies.
  • Reply 10 of 176
    nofeernofeer Posts: 2,422member
    Marketing scams don t work
    You can fool the people.......
    Samsung plastic mess has finger scan that doesn't work
    I don't care how much you spend on marketing
    A pig I a tuxedo is still a pig
    Now the bottom feeders have figured out samscum strategy
    Gee crash in profits well good I hope their stock price falls triple what value they
    STOLE from apple
    Dyson should also be laughing

    A discussion at lunch by someone saying how much apple has let him down he is breaking free and going to samscum s5

    I told him their flagship product is so wonderful samscum fired its designer
    So embrace that technology FAILURE

    He was silent And others in the room chuckled

    Hey what's the return policy
  • Reply 11 of 176
    blackbookblackbook Posts: 1,361member
    And yet their stock is up
  • Reply 12 of 176
    macxpressmacxpress Posts: 4,760member

    Bahahahahahaha!!!!

     

    The next big company is already here...Apple! 

  • Reply 13 of 176
    starbird73starbird73 Posts: 538member
    Quote:

    Originally Posted by TheWhiteFalcon View Post

     

     

    I knew something was up when the phone launched with BOGO offers. That's not something you do if you expect it to sell well.


     

    Verizon had BOGO offers for pre-orders on the S5...

     

    http://www.androidpolice.com/2014/04/04/verizons-galaxy-s5-pre-order-is-now-available-249-99-with-a-two-year-contract-bogo-offer-included/

  • Reply 14 of 176
    MacProMacPro Posts: 18,005member
    I have to think the top level management at Samsung are taking a long hard look at their smart phone division's almost insane desire to beat Apple at all costs. Flooding the market with very low profit products is hurting the whole company. I seriously suspect some heads may roll in the phone division over this and they may scale back the desire to 'win' the numbers game (AKA chanel stuffing, discounts, give awaits and so on) and go back to looking at how to actually make money, even if that means conceding that Apple is actually selling more profitable products by far.
  • Reply 15 of 176
    karmadavekarmadave Posts: 300member
    I guess copying Apple can only get you so far...
  • Reply 16 of 176
    blazarblazar Posts: 270member
    There are likely a LOT of folks waiting to see what apple is coming up with before buying anything further.
  • Reply 17 of 176
    ceek74ceek74 Posts: 323member

    "The next worst thing"™

  • Reply 18 of 176
    thewhitefalconthewhitefalcon Posts: 4,453member
    Quote:

    Originally Posted by blazar View Post



    There are likely a LOT of folks waiting to see what apple is coming up with before buying anything further.



    Agreed. It's pretty widely known that the iPhone 6 will have some large screen options, and that's the reason many Samsung owners bought their phones anyway. Give them a choice to get a modern, fresh OS, amazing hardware crafted by Ive & Co, and a large screen? They'll be lining up around the globe.

  • Reply 19 of 176
    aduzikaduzik Posts: 94member

    Now that mid-to-low end Android phones are "good enough" for most customers, high end Android phones are a harder sell. They're getting squeezed from the low end by commodity device makers and suffering from their own channel stuffing practices.

     

    They're also getting squeezed from the high end by Apple. After two generations of very little compelling new technology in their phones, more of their remaining high end customers are looking to Apple. We're seeing that copying and big screens can only take you so far. At some point, you actually have to innovate. Once the next iPhone launches with a bigger screen and a more extensible iOS 8, a lot of those customers' objections to the iPhone will disappear and they'll bring their dollars with them.

  • Reply 20 of 176
    davendaven Posts: 496member
    I don't care if their profits are dropping as long as they have the money to pay off their patent losses to Apple.
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