Samsung profits drop as mobile arm suffers 37.6% crash in Q2
Apple competitor and smartphone arch nemesis Samsung on Thursday local Korea time reported quarterly profits for the second quarter dropped 8 percent from the same time last year, a dip largely blamed on abysmal performance from its mobile unit.
Samsung announced a miss for the quarter ending June with profits capping out at 5.75 trillion Korean won ($4.9 billion), down 8 percent year over year. Contributing to the poor showing was a drastic drop in mobile profits, which plummeted from 4.42 trillion won in 2014 to 2.76 trillion won this past quarter, a decline of 37.6 percent.
It appears Samsung's mobile division is getting squeezed between Apple on the high-end and Chinese upstarts like Xiaomi on the other. Over the same three-month period ending June, Apple managed to again grow iPhone marketshare, this time 35 percent year over year which equated to a 59 percent jump in revenues. Average selling price for iPhone was pegged at $660, up $99 from last year.
According to Bloomberg, Samsung misread demand for its unique curved screen Galaxy S6 Edge model, instead focusing production efforts on normal versions that went head to head against iPhone. A report covering Samsung's earning estimates earlier this month cited a source as saying the company thought regular S6 sales would outpace S6 Edge four-to-one.
To stanch the bleeding, Samsung plans to cut mobile sector spending, modify Galaxy product pricing and introduce more mid- and low-end models to its smartphone lineup, a strategy meant to capitalize on gaps between competing product ranges. For years the company profited on similar maneuvers targeting consumers' want for big-screened "phablet" devices, but that came to an abrupt end last year after the launch of iPhone 6 and iPhone 6 Plus.
Samsung announced a miss for the quarter ending June with profits capping out at 5.75 trillion Korean won ($4.9 billion), down 8 percent year over year. Contributing to the poor showing was a drastic drop in mobile profits, which plummeted from 4.42 trillion won in 2014 to 2.76 trillion won this past quarter, a decline of 37.6 percent.
It appears Samsung's mobile division is getting squeezed between Apple on the high-end and Chinese upstarts like Xiaomi on the other. Over the same three-month period ending June, Apple managed to again grow iPhone marketshare, this time 35 percent year over year which equated to a 59 percent jump in revenues. Average selling price for iPhone was pegged at $660, up $99 from last year.
According to Bloomberg, Samsung misread demand for its unique curved screen Galaxy S6 Edge model, instead focusing production efforts on normal versions that went head to head against iPhone. A report covering Samsung's earning estimates earlier this month cited a source as saying the company thought regular S6 sales would outpace S6 Edge four-to-one.
To stanch the bleeding, Samsung plans to cut mobile sector spending, modify Galaxy product pricing and introduce more mid- and low-end models to its smartphone lineup, a strategy meant to capitalize on gaps between competing product ranges. For years the company profited on similar maneuvers targeting consumers' want for big-screened "phablet" devices, but that came to an abrupt end last year after the launch of iPhone 6 and iPhone 6 Plus.
Comments
Lulz. Android is a security nightmare (to put it kindly) and people are wising up to the fact that Samsung are thieves.
It's not a bloodletting. It's a full-on hemorrhage
Yeah because making less models is a sure fire way to success.
Yeah because making less models is a sure fire way to success.
No, it isn't.
But concentrating on making a small number of good models rather than shotgunning a million crap designs across the market might help.
Sincerely,
A happy Apple shareholder
Ridiculous that Wall Street does not see that Apple will dominate smartphone sales for the foreseeable future.
So long as Apple continues to rake in the majority of profits from smartphones I could care less about the Church of Market Share which Wall Street seems to value more....
Lulz. Android is a security nightmare (to put it kindly) and people are wising up to the fact that Samsung are thieves.
It's not a bloodletting. It's a full-on hemorrhage
From an financial standpoint, companies that barely make profits are also companies that are least likely to offer support in the way of timely security updates, if any updates at all. Android OS practically guarantees that profits are little or non existent. Samsung's fate is to be nibbled to death by profitless builders rising from the bottom, though at least Samsung is still generating some profits from smartphones.
Yeah because making less models is a sure fire way to success.
I think ceek74 was being sarcastic, in that huge variety of products doesn't seem to work in this industry.
[@]dasanman69[/@] is well aware of that, hence his sarcastic rebuttal saying that fewer smartphones aren't going to help them succeed. I disagree with dasanman69; I think that fewer models that concentrated on being the best possible HW and SW experience possible could absolutely get more of the higher-end Android market, whilst also eschewing the loss leaders that probably make up 98% of the handsets they sell… but Samsung won't do it because their philosophy doesn't allow them to carefully plan for a longterm solution.
It's been 2 years since HTC moved to that strategy and it hasn't helped. Both LG and Motorola have streamlined their high end offerings as well and continue to lose market share. How much longer should we wait to see if that strategy will be successful?
1) Why do you think some vendors have moved (slightly) away from their "make as many models as possible, sell at a loss, and we'll make it up in volume" plans? Answer: They weren't losing too much.
2a) They didn't really do it, they only moved slightly closer toward it; and I'm not sure that's enough to make it work.
2b) At any rate, starting a mere 2 years ago isn't what I'd call longterm. I'm talking about taking a real risk as a company that has a history of throwing everything a wall to see what sticks by completely changing course on everything in their mobile division and expecting that customer opinion and as a result profits could take 5 years or more (depending on speed of success) before your brand gets seen as a premium brand that customers wait in lines for, and your detractors append "-killer" to the end of your product because they hate that your company has so much mindshare. That is not something that only Apple can do in this space, it's merely that Apple is the only one that was willing to risk the road less traveled to make that a reality.
2c) Those timeframes to change the major of public opinion are really only if you want to keep the current names. If, for example, you create a luxury brand subsidiary like Lexus, Infiniti and Acura, you may be able to knock of a couple years since you're mostly building new brand awareness, not trying to rewrite a previous brand that you soiled for customers through repeated lackluster and half-ass products.
How come they're blaming the shortfall in not anticipating demand for the S6 Edge when my local carrier store has them in stock?
It's BS spin. Maybe misanticipation of the curved model would have caused issues in the beginning, but it almost certainly did not affect total sales. What were people who wanted the curved screen but it wasn't available gonna do? There is no other manufacturer providing curved screens, so they would either wait, or buy a different phone (also uncurved) which would likely be the flat S6.
Yeah because making less models is a sure fire way to success.
Making 1-2 new models a year is the only business model (Apple's) that has shown any long-term success in mobile. So show it some respect please. It isn't going to work for everyone who tries it, but its a much better bet than the proven failed strategy of simultaneously cutting R&D while spamming more models.
How come they're blaming the shortfall in not anticipating demand for the S6 Edge when my local carrier store has them in stock?
Shhhh! The tech websites might hear you!