Samsung warns investors of first holiday quarter profit decline since 2011
Samsung Electronics has released "preliminary earnings guidance" for the December quarter, calling for revenues of around 52T KRW ($47B) and operating profits of about 5.2T KRW ($4.73B), a profit decline of 37 percent compared to the year-ago quarter -- its first such decline for the holiday period since 2011.
Samsung's profits have been on the skids for five consecutive quarters. For the previous Q3 ending in September, the company reported a 60 percent overall drop in profits and an even larger 73.9 percent profit collapse within its Mobile division (which makes phones, tablets and PCs, making the group comparable to Apple's entire business).
The 37 percent decline for Q4 sounds like an improvement over the 60 percent drop in Q3, but Samsung's previous Q3 represented a record high for the firm. This year's Q4 is being compared to a year-ago quarter where the company's profits had already begun to unravel.
A report by Se Young Lee of Reuters cited "several analysts" as stating that the company's semiconductor division had again earned more than its Mobile division in the quarter.
It also cited "a person with direct knowledge of the matter" as saying the company's component sales were "up across the board," lifted by strong demand for memory chips and display panels. That indicates that the brunt of Samsung's profit collapse came from continued lackluster performance in tablet and phone sales, particularly among the most profitable segment of premium devices.
Reuters cited Baik Jae-yer of Korea Investment Trust Management as stating, "It'd be hard to expect a sharp pickup in earnings from the mobile division in the absence of a hit product."
Samsung's implosion of its mobile business, due in large part to Apple's thorough domination of the premium phone markets with iPhone 6 and 6 Plus, is expected to continue as the company focuses on lower and middle tier phones that put it in direct competition with cutthroat competitors with razor thin margins all offering commodity devices largely running Android.
Last quarter, Samsung noted that its mobile sales were "driven by mid to low-end products." Between 2010--when Samsung first embarked upon a systematic effort to copy Apple's iPhone 3GS--and the end of 2013, the company grew to account for more than 50 percent of all sales of Android products and represented the vast majority of the profits generated by Android licensees.
Bloomberg noted that according to its analyst survey, Samsung's mobile division operating income appears to have fallen to 1.6T KRW ($1.5B) on sales of 27T KRW ($24.5B).
"That would be the unit's smallest quarterly profit in almost four years," the site observed.
In part, that was because Samsung's co chief executive J.K. Shin misled Wall Street Journal reporters into believing that the company's Galaxy S5 flagship had been "outpacing the performance of its previous model by 10%" last March. Six months later, the same paper acknowledged that the Galaxy S5 had actually been a dud, selling 40 percent fewer units in its launch quarter despite the company's operational mistake of building 20 percent more of the model.
That resulted in a glut of inventory Samsung has been trying to liquidate throughout the year, building up to a spectacularly bad Q3. Overall, Samsung is expected to report full year, overall profits of 25T KRW ($20B), a 32 percent decline over the 36.8T KRW ($30B) it earned in 2013.
Samsung's profits have been on the skids for five consecutive quarters. For the previous Q3 ending in September, the company reported a 60 percent overall drop in profits and an even larger 73.9 percent profit collapse within its Mobile division (which makes phones, tablets and PCs, making the group comparable to Apple's entire business).
The 37 percent decline for Q4 sounds like an improvement over the 60 percent drop in Q3, but Samsung's previous Q3 represented a record high for the firm. This year's Q4 is being compared to a year-ago quarter where the company's profits had already begun to unravel.
Mobile troubles appear central to Samsung's profit collapse
Samsung won't release its detailed earnings numbers for another two weeks, but the continued slide in the company's guidance estimate for overall earnings and profits again appears to center on weak sales of premium phones within its Mobile division.A report by Se Young Lee of Reuters cited "several analysts" as stating that the company's semiconductor division had again earned more than its Mobile division in the quarter.
It also cited "a person with direct knowledge of the matter" as saying the company's component sales were "up across the board," lifted by strong demand for memory chips and display panels. That indicates that the brunt of Samsung's profit collapse came from continued lackluster performance in tablet and phone sales, particularly among the most profitable segment of premium devices.
Reuters cited Baik Jae-yer of Korea Investment Trust Management as stating, "It'd be hard to expect a sharp pickup in earnings from the mobile division in the absence of a hit product."
Samsung's implosion of its mobile business, due in large part to Apple's thorough domination of the premium phone markets with iPhone 6 and 6 Plus, is expected to continue as the company focuses on lower and middle tier phones that put it in direct competition with cutthroat competitors with razor thin margins all offering commodity devices largely running Android.
Last quarter, Samsung noted that its mobile sales were "driven by mid to low-end products." Between 2010--when Samsung first embarked upon a systematic effort to copy Apple's iPhone 3GS--and the end of 2013, the company grew to account for more than 50 percent of all sales of Android products and represented the vast majority of the profits generated by Android licensees.
Bloomberg noted that according to its analyst survey, Samsung's mobile division operating income appears to have fallen to 1.6T KRW ($1.5B) on sales of 27T KRW ($24.5B).
"That would be the unit's smallest quarterly profit in almost four years," the site observed.
Samsung's implosion a surprise to some
While Samsung's decline began a year ago, its sudden profit collapse wasn't predicted by journalists such as Daisuke Wakabayashi of the Wall Street Journal, who had instead helped maintain "a story line" that Apple's "formidable growth had petered out and Samsung Electronics Co. was eating its lunch."In part, that was because Samsung's co chief executive J.K. Shin misled Wall Street Journal reporters into believing that the company's Galaxy S5 flagship had been "outpacing the performance of its previous model by 10%" last March. Six months later, the same paper acknowledged that the Galaxy S5 had actually been a dud, selling 40 percent fewer units in its launch quarter despite the company's operational mistake of building 20 percent more of the model.
That resulted in a glut of inventory Samsung has been trying to liquidate throughout the year, building up to a spectacularly bad Q3. Overall, Samsung is expected to report full year, overall profits of 25T KRW ($20B), a 32 percent decline over the 36.8T KRW ($30B) it earned in 2013.
Comments
i might be wrong, but i never recall reading details like this about a microsoft, google, nokia, motorola, htc, lg, sony, or any other companies quarterly earnings.
thanks for the info, but we all know how this site feels about samsung. you have beat this dead horse long enough. apple does have other competitors.
Keep these Samsung articles coming, Daniel.
I guess this is karma for them. Wonder if they'll fire their president.
Keep up the great work Daniel.
The trajectory of the profits graph must look ominous for Samsung: losses next quarter. So much for the only other maker making money from phones; at this rate they might have to scrap their phone division. Ain't karma a bitch!
i might be wrong, but i never recall reading details like this about a microsoft, google, nokia, motorola, htc, lg, sony, or any other companies quarterly earnings.
thanks for the info, but we all know how this site feels about samsung. you have beat this dead horse long enough. apple does have other competitors.
All of those other "competitors" are barely making a profit, let alone one worth talking about. It's not about beating a dead horse. It's about beating down a criminal of a company that should be put out of business, and that's just not the Mobile Division.
Nearly all of Samsung's product lines are guilty of the same type of copyright infringement... appliances, TVs (electronics in general) etc., all infringe upon other companies' patents or designs... LG, Dyson and plenty others have all filed infringement lawsuits on Samsung. We only ever hear about Apple's lawsuits, because they're the most profitable and recognized company in the world. On top of that, general quality is typically average to subpar across all of their product lines. God help us if they start bringing their crap cars to the USA.
Are we past Peak Android? Is Android dying?
Seems like that's a real possibility. Samsung is making less and less money off their Android products, and pushing Tizen harder and harder. None of the other Android-oriented manufacturers have ever made more than a pittance off of it. Larry Page has ousted Andy Rubin from running the Android program and replaced him with one of Android's biggest competitors, Sundar Pichai. Over a year later, Pichai still seems to have no clear plans for Android going forward: nothing changes for the first couple of years, then "we'll see". Well, it's getting on towards a couple of years. What's the plan for Android? Continue to merge and submerge under Chrome? Chrandroid? ChromeOS running on phones, ala FirefoxOS?
Sure, a lot of companies are still shipping a ton of Android-based gadgets, but most of them are the cheap knock-offs that don't run the Google-licensed stuff and don't make any meaningful contributions to its longevity. They eat from the trough but don't fertilize the fields. What happens to Android if/when Google decides to turn off the life support, or cut it down to something less financially painful? Android is just another Linux fork without Google pumping boatloads of cash and developer time into it. And if it's no longer providing an effective moat for Google's search CPCs, Page might decide it's time to trim the fat a bit, and make some deep cuts to the Android team.
i might be wrong, but i never recall reading details like this about a microsoft, google, nokia, motorola, htc, lg, sony, or any other companies quarterly earnings.
thanks for the info, but we all know how this site feels about samsung. you have beat this dead horse long enough. apple does have other competitors.
Detail quarterly reports on all of these companies can easily be found on any business news sites. Since most Fandroids have no reason to visit any business news sites, this article (with all its' detail) is here with them in mind. Since most of them do seem to visit AI, with bashing Apple in mind.
Agree.
I was thinking a couple of years ago that Android would take over, but then the Samsung and HTC infringement cases came up. And then Goog released KitKat then Lollipop - neither of which addressed the cheapness of the OS. And to top it all off, the cheapy-chips from China, like you've stated, are simply better at Samsung's game than it is.
I think Android is a success for what it was intended - an open-source pile of OS. Google tried making into a profit-generating OS, which it is not.
As far as I can tell, the next big competitor to iOS will be MS, but they've got SUCH a long way to go!
Good. Good riddance.
Are we past Peak Android? Is Android dying?
Seems like that's a real possibility. Samsung is making less and less money off their Android products, and pushing Tizen harder and harder. None of the other Android-oriented manufacturers have ever made more than a pittance off of it. Larry Page has ousted Andy Rubin from running the Android program and replaced him with one of Android's biggest competitors, Sundar Pichai. Over a year later, Pichai still seems to have no clear plans for Android going forward: nothing changes for the first couple of years, then "we'll see". Well, it's getting on towards a couple of years. What's the plan for Android? Continue to merge and submerge under Chrome? Chrandroid? ChromeOS running on phones, ala FirefoxOS?
Sure, a lot of companies are still shipping a ton of Android-based gadgets, but most of them are the cheap knock-offs that don't run the Google-licensed stuff and don't make any meaningful contributions to its longevity. They eat from the trough but don't fertilize the fields. What happens to Android if/when Google decides to turn off the life support, or cut it down to something less financially painful? Android is just another Linux fork without Google pumping boatloads of cash and developer time into it. And if it's no longer providing an effective moat for Google's search CPCs, Page might decide it's time to trim the fat a bit, and make some deep cuts to the Android team.
Could be. I think they just invested so much in Android to prevent Apple becoming a monopoly in mobile, which they saw as a threat to their services. But since that hasn't happened, maybe Android has served it's purpose for them? Is that what the "We'll see," is - watching Apple's market share to see if it's stabilised?
Long term I don't think they want to be an OS company, but an Internet services company.
And these are only the numbers they "cooked" to not cause investor panic and investigation by the already-bought government. These are also preliminary numbers.
"Preliminary" is Korean for "Let's see if they buy this shit before dumping the whole bad news on them'
Keep in mind the clock is almost run out on Google's search patents. They are desperate for something to replace that money stream...so desperate they took a chance on fucking up their relationship with Apple (and lost). That's why you see them sinking a fortune in barges (sorry for the ironic turn of the term), buying military robot companies, and other crap investments so dissimilar to their core business... Like a growing man, Google is grabbing at whatever flotsam that drifts into view.
So who is really pushing Android now? Other than Google? Whatever happened to all that Motorola stuff they bought and then turned around and got rid of the parts they really could have innovated in?
I hate to say it, but Samsung and LG are stumbling over each other to get out of the Android ecosystem as fast as possible and try to duplicate Apple's closed ecosystem. I was playing with my parents LG Smart TV and it has a list of notices of services being discontinued, I can't even get last years apps to run on it. I was reading the manuals for LG and Samsung SmartTV's and I'm kinda disgusted at all the features that are unusable without a matching smartphone. I'm... of the mind that I don't want to spend 600$/year on replacing the "smartTV"'s guts any more than I want to spend 1000$/yr replacing smart phones.
I think we'd be better off if there was a way to just use the smartphone as the "smartphone/smarttv" guts. Without the phone it should act as a regular DisplayPort/HDMI monitor.
Samsung is a perfect Case Study on why companies should not listen to Wall Street and their stupid MBA analysis that Market Share is the most important thing to achieve.
Every company before them who chase the Market Share Carrot end up in this exact same situation, First it was Motorola, then Nokia and now Samsung, and who ever takes over the market leader position at all costs will end up the same way.
i might be wrong, but i never recall reading details like this about a microsoft, google, nokia, motorola, htc, lg, sony, or any other companies quarterly earnings.
thanks for the info, but we all know how this site feels about samsung. you have beat this dead horse long enough. apple does have other competitors.
I'm fairly certain that if I were to compare notes with any other "Apple zealot" that I'd be near the top of any attempted ranking of such. Perhaps DED would be on that list, too. But at the same time, count me out of any silly ". . .we all know how this site feels about. . ." consensus about anything.
Personally, I detest the apparent fact that Samsung seems to be getting away with not paying for its transgressions against Apple in the explicitly monetary sense of not paying the court-assigned penalties.
However, I believe that individuals, as well as companies made up of individuals, tend to reap their own justice, aside from the presence or absence of any official punitive actions which may have taken place. And in the case of Samsung, they do in fact seem to be reaping what they've sown—in the broader context of the financial health of the entire company.
I think news of such is entirely appropriate for AI to be reporting, and who better to do such than DED? I respect his journalistic reputation and de facto credentials, as well as his particular style. And I believe that he continues to put the lion's share of attention on factual content compared with any possible bias or agenda he may have against the unit-Apple horde.
i might be wrong, but i never recall reading details like this about a microsoft, google, nokia, motorola, htc, lg, sony, or any other companies quarterly earnings.
thanks for the info, but we all know how this site feels about samsung. you have beat this dead horse long enough. apple does have other competitors.
I agree with you... I think we're quite far into the "who gives a shit" territory where Samsung is concerned.
Could be. I think they just invested so much in Android to prevent Apple becoming a monopoly in mobile...
Stop with the monopoly bullshit. Apple could NEVER be a monopoly in the mobile world. Every time some company becomes a dominant participant in a market the asshats start screaming monopoly, especially the fans of the companies being dominated. Monopoly is a term from the era of the 19th century robber barons like Carnegie and Rockefeller. In a global economy no one company can become a monopoly.