Samsung's mobile profits plunge 64.2% after Apple's iPhone 6 devastates premium Galaxy sales

Posted:
in iPhone edited March 2015
Samsung Electronics reported overall Q4 operating profits of 5.29 trillion won ($4.9 billion)--a 36 percent year-over-year drop--but its Mobile division suffered a 64.2 percent drop in profits, falling from $5 billion in the year ago quarter to $1.8 billion in the December quarter.

Samsung


Apple's overall operating profits for the quarter were $24.2 billion, up 36.9 percent over the year ago quarter. That means Samsung Mobile is now earning less than 7.5 percent of Apple's profits while still shipping more phone units. Samsung Mobile is now earning less than 7.5 percent of Apple's profits while still shipping more phone units

Apple's net (after tax) profits were $18 billion for the quarter, provisioning $6.4 billion for tax payments. Samsung reported just $230 million in income taxes, an effective tax rate of 4.5 percent.

Apple's effective tax rate is 26.4 percent. Apple pays so much more in taxes that some pundits in 2013 confused Apple's net income with Samsung's operational income, incorrectly reporting that Samsung had earned more than Apple.

Samsung still hasn't paid Apple the nearly $1 billion judgement it was ordered to pay back in 2012 for patent infringement. However, it reported a $4.79 billion drop in mobile profits last quarter and an additional $3.2 billion decrease in the winter quarter, meaning that $7.2 billion of Samsung's profits have vanished over just the last six months of 2014 compared the same period in 2013.

Profit contribution from Samsung's smartphones collapsed in half within 2014

Samsung reported that while its overall sales were only down just slightly more than 11 percent over the year ago quarter, its mobile device revenues were down by 23.2 percent.

That was exaggerated into a 64.2 percent drop in mobile profits, because its lost sales where primarily among its higher end Galaxy S and Note product lines where it makes most of its profits.

That's a critical problem for the company because most of its profits have been coming from its IT & Mobile Communications (IM) group, which is roughly comparable to Apple's operations. Other divisions of Samsung Electronics include its CE group that sells TVs and appliances (which remained flat year-over-year) and its DS division that includes sales of display panels, semiconductors and memory components (up 4.2 percent over the year ago quarter).

At the beginning of 2014, Samsung IM was contributing 70 percent of the company's profits, primarily from smartphone sales, specifically from sales of its higher end Galaxy S and Note devices. Mobile division sales, which also include Samsung's Chromebooks, Windows products and Galaxy Tab tablets, currently account for only 37 percent of the company's profits.

Samsung profits <img class=" style="border: 0px;" />

Samsung notes a black hole in the Galaxy

The company's earnings release noted that within the IM group, "despite slight decline in smartphone shipments QoQ, earnings improved due to efficient cost management and increase in revenue from improved product mix."

Samsung's IM profits were indeed up nearly 12 percent over the previous quarter, when then company described a "slight growth in shipments" while seeing its mobile group profits plummet by 73.9 percent.

The company noted "ASP [average selling prices] improved due to increase of high-end product portion, mainly driven by global expansion of [Galaxy] Note 4," but in the launch quarter of Samsung's most expensive phone, its financial summary made no comment on the 64.2 percent profit plunge compared to the previous Note 3 launch.$7.2 billion of Samsung's profits have vanished over just the last six months

In the previous quarter, Samsung said its phone shipments were "driven by mid to low-end products," adding that its Note 4 release only contributed a "marginal increase" due to being released at the very end of the quarter. That makes the company's winter quarter results particularly devastating, because even at the apex of Note 4 sales the flagship phablet wasn't able to reverse the implosion of the company's mobile sales.

Samsung stated that its "tablet shipments increased QoQ with Tab4 sales growth," but non-phone tablets weren't enough to rescue the quarter's results either. Samsung's tablet business is not very profitable.

Looking forward over 2015, the company guided, "expect smartphone competitions to intensify amid the demand growth driven by LTE and emerging market," and "expect tablet growth to continue with mid to low-end demand."

It also stated that the company has a "focus on increasing smartphone shipments and securing profitability with new product portfolio."

Specific to the March quarter, Samsung set expectations low, warning, "expect decrease in smartphone and tablet demand under weak seasonality" and said it aimed to "strive to improve earnings with smartphone shipments growth due to the expansion of A series [middle tier phones], etc."

Samsung's second lowest profits since 2011

Samsung profits down


A report by Korea JoongAng Daily noted that the previous quarter had been the first where Samsung had earned less than 5 trillion won since Q3 2011. This quarter, Samsung just exceeded that level with profits of 5.29 trillion won, but the results still remain much lower than any point over the last two years (apart from Q3).

The paper cited Lee Se-chul, an analyst at Woori Investment & Securities, as saying "Samsung's smartphone performance is declining, and as the market is entering a phase of maturity, it is not easy for the company to come up with products differentiated from others."

The report had also correctly outlined that "analysts expect that the fourth quarter will not be a major improvement from the third quarter."
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Comments

  • Reply 1 of 145
    mpantonempantone Posts: 1,349member
    Gee, does this mean the end to Samsung Galaxy BOGO deals for American consumers?

    :p
  • Reply 2 of 145
    solipsismysolipsismy Posts: 5,099member
    What is this, Samsung Insider?¡
  • Reply 3 of 145
    The Next Big Decline Is Here(TM)





    Poor Sammy, couldn't happen to a nicer company. /s
  • Reply 4 of 145
    fallenjtfallenjt Posts: 3,959member
    Where are those clowns saying that Note3-4 is superior? Apple ate Samsung's lunch on all high end smartphone categories. Next Big Thing is already gone.
  • Reply 5 of 145
    kenckenc Posts: 185member
    "Apple's overall operating profits for the quarter were $24.2 billion, up 36.9 percent over the year ago quarter. That means Samsung Mobile is now earning less than 7.5 percent of Apple's profits while still shipping more phone units."
    So, do you think Apple's share of global mobile phone profits now exceed 90%?

    And, doesn't Samsung also owe Microsoft over $1B a year. With the $1B they owe Apple, before you know it, those couple trillion of won will add up to real money.
  • Reply 6 of 145
    solipsismysolipsismy Posts: 5,099member
    fallenjt wrote: »
    Where are those clowns saying that Note3-4 is superior? Apple ate Samsung's lunch on all high end smartphone categories. Next Big Thing is already gone.

    Hold your horses, they'll come soon enough. It takes time to flash your Android phone with the latest custom ROM.
  • Reply 7 of 145
    solipsismy wrote: »
    Hold your horses, they'll come soon enough. It takes to flash your Android phone with the latest custom ROM.

    They've also got to install today's hip app launcher, then scroll past six hundred fifty three widgets. Add in Android system animation lag and, well, you get the picture.
  • Reply 8 of 145
    Some say it's not nice to laugh at other people's misfortunes.

    I say: ha ha ha.
  • Reply 9 of 145
    I'm convinced that DED has a boilerplate for Samsung at the ready. This was reported only within the last half-hour and already there's a 20-paragraph article
  • Reply 10 of 145
    512ke512ke Posts: 781member
    "The market is entering a phase of maturity"

    Unless you're APPLE
  • Reply 11 of 145
    The Next Big Decline Is Here(TM)
    You win the Internet!




    Poor Sammy, couldn't happen to a nicer company. /s
  • Reply 12 of 145
    I'm convinced that DED has a boilerplate for Samsung at the ready. This was reported only within the last half-hour and already there's a 20-page article

    We all knew Samsung was going to be down for this quarter and the foresight to prepare is a cornerstone of intelligence, so you're really given DED a compliment.
  • Reply 13 of 145
    dimmokdimmok Posts: 359member

    Reap what you sow Samsung.

  • Reply 14 of 145
    I'm convinced that DED has a boilerplate for Samsung at the ready. This was reported only within the last half-hour and already there's a 20-page article

    I'm convinced you live waiting for every DED article to post a negative comment about it.
  • Reply 15 of 145
    Quote:

    Originally Posted by SolipsismY View Post





    We all knew Samsung was going to be down for this quarter and the foresight to prepare is a cornerstone of intelligence, so you're really given DED a compliment.



    I think it's a pretty good article. Lord knows I've had my issues with him in the past but this one is good

  • Reply 16 of 145
    solipsismy wrote: »
    What is this, Samsung Insider?¡

    Every article is spell-checked, relevant, and tastes like chocolate ice cream, and you will stay in the forums and post nothing but praise, Mister.
  • Reply 17 of 145
    512ke wrote: »
    "The market is entering a phase of maturity"

    Unless you're APPLE

    And it's fast follower.
  • Reply 18 of 145
    sflocalsflocal Posts: 4,381member
    Isn't karma a bitch Samsung?? They can't really copy Apple anymore since they know they are under a microscope. That means they have to prove to everyone that the can actually innovate.

    All they've shown is that they are a roomful of monkeys with zero ability to make anything on their own without their R&D department at 1 Infinity Loop.

    Looking forward to reading Samsung having to do cost-cutting measures.

    A$$w!pes.
  • Reply 19 of 145
    Awesome. I wonder if they'll have another lame super bowl commercial to celebrate their never ending failures.
  • Reply 20 of 145
    Imagine how bad it would be for Scamsung if Apple wasn't feeding their chip business billions of dollars a year.
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