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 Samsung is bracing itself for its weakest smartphone profit growth
this year since it started making the devices in 2007, as arch rival
Apple Inc challenges its domination in China's $80 billion market.
Samsung's mobile devices business, which earns two thirds of the
company's profit, will come under pressure when Apple makes its
phones available from January 17 via China Mobile Ltd, through which
Samsung has been selling smartphones for around seven years.
Apple is also widely expected to sell smartphones with larger
screens come autumn when it traditionally announces products,
neutralizing a selling point that Samsung has enjoyed since
introducing its Galaxy Note in late 2011.
"Even taking into account one-off costs, the profit is lower than
expected. Samsung has not provided details, but smartphone profit
may have fared worse than expected, given increased marketing
expenses," said Lee Seung-woo, an analyst at IBK Investment &
Securities.
The guidance, released on Tuesday ahead of full quarterly results
scheduled for January 24, was lower than a 9.75 trillion won Thomson
Reuters' Starmine SmartEstimate of 23 analysts, which gives greater
weighting to the more accurate analysts.
At 8.3 trillion won, it was even below the most bearish forecast of
8.8 trillion won, and was the lowest since the 8.06 trillion won of
the third quarter of 2012.
The reading would be 18 percent less than the record 10.2 trillion
won of July-September as Apple enjoyed buoyant sales in the United
States and Japan during the year-end holiday season.
Fourth-quarter earnings were also likely pulled down by a special
bonus related to the 20th anniversary of the "New Management"
strategy of Chairman Lee Kun-hee, which analyst estimates put at 300
billion to 700 billion won.
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"Samsung's special incentive payments to employees including
domestic and overseas units appear to have been much larger than the
market expected; marketing costs of its mobile business might have
also been larger," said Kim Young-chan, tech analyst at Shinhan
Investment Corp.
The South Korean firm estimated its fourth-quarter sales at 59
trillion won, versus a market forecast of 61 trillion won.
Samsung shares have been pummeled in recent weeks by 22 analysts
downgrading fourth-quarter earnings estimates over the past 30 days.
The shares, worth $190 billion, fell 10 percent over the past
fortnight to a 4-month low last week, wiping off market value to the
tune of $19 billion — equal to the total value of shares of Sony
Corp.
The won's rise to a five-year high against the U.S. dollar has also
been prompting investors to sell, as a strong won reduces the value
of Samsung's repatriated earnings.
(Reporting by Miyoung Kim; additional
reporting by Hyunjoo Jin and Joyce Lee; editing by Christopher
Cushing)
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