The South Korean tech giant estimated that its January-March
operating profit fell by 4.3 percent to 8.4 trillion won ($7.96
billion), slightly below an average forecast of 8.5 trillion won by
40 analysts polled by Thomson Reuters I/B/E/S.
The world's biggest smartphone maker is counting on the fifth
version of its flagship Galaxy S smartphone, which goes on sale
globally from Friday, to right the ship and prove the firm's staying
power as a mobile innovator.
But the Galaxy S5 has already got off to a weak start at home, with
its South Korean debut marred by a temporary ban on mobile carriers
selling handsets and criticism that it lacks eye-catching new
Underscoring the challenges, Samsung priced the S5 about 10 percent
cheaper than the S4 even though main rival Apple Inc is not widely
expected to update its line-up until September. It also dialed back
on marketing glitz to keep margins stable.
Analysts said the company's efforts to rein in component costs and
make products that appeal to a wider audience will be crucial as
Samsung braces for what could be its first annual profit decline in
"What Samsung needs to do this year for additional growth are things
like cost reduction and reducing marketing costs," HMC Investment
and Securities analyst Greg Roh said.
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"In some sense, Samsung has no way to prevent a decline in its
earnings without improving internal efficiencies."
Samsung estimated its first-quarter sales at 53 trillion won,
compared with a market forecast of 54.58 trillion won. Full
quarterly results are likely to be announced by April 25.
Shares in Samsung closed up 1.2 percent on Monday prior to the
earnings estimate announcement.
The stock is nearly 12 percent off the record high hit in January
last year, weighed by worries over high-end market saturation and
competition from cheap Chinese rivals.
(Reporting by Se Young Lee; editing by Stephen Coates)
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