|
 The world's smartphone leader has seen its global market share
decline in annual terms for the past two quarters, according to
Strategy Analytics, out-classed by Apple Inc's iPhones in the
premium segment and undercut by Chinese rivals like Lenovo Group Ltd
and Xiaomi Inc at the bottom end.
Even so, Samsung's shares had jumped 1.1 percent by 10.29 p.m. EDT
on Monday, reflecting expectations that the company's profits have
bottomed and will pick up with the launch of cheaper smartphone
models in the months ahead.
"Considering the operating profit guidance, it looks like the
company dealt with unsold inventory issues during the third
quarter," Alpha Asset Management fund manager Hong Jeong-woong said.
"I think Samsung's earnings are at a turning point."
Samsung said in a regulatory filing on Tuesday that operating profit
for the third quarter likely fell 59.7 percent to 4.1 trillion won
($3.8 billion), well below a mean forecast of 5.6 trillion won
tipped by a Thomson Reuters I/B/E/S survey of 43 analysts.
This would mark the South Korean giant's weakest quarterly profit
since the second quarter of 2011 and the fourth consecutive quarter
of earnings declines on a yearly basis.
Samsung said that although "uncertainty" persisted in the mobile
business, which accounted for nearly 70 percent of its 2013
operating profit, it "cautiously expects" higher shipments of new
smartphones and strong seasonal demand for TV products.
Many analysts and investors believe the best days are behind
Samsung's mobile division as it will need to sacrifice margins to
keep cheaper Chinese handsets grabbing more of its turf, even though
new products like the Galaxy Note 4 will help nudge profits higher
in the current quarter.
Operating margin for the smartphone business fell substantially in
the quarter due to higher marketing expenditure and sharply lower
average selling prices, as the proportion of shipments for high-end
devices fell and prices for older models dropped, Samsung said.
HMC Investment analyst Greg Roh said Samsung's average smartphone
selling price likely fell to $224 in the third quarter from $301 in
the second quarter. In comparison, Counterpoint analyst Tom Kang
says Apple's average sales price may rise to about $605 for
July-September from $580 in the previous period, with the release of
new iPhone models.
[to top of second column] |
While smartphone prices will generally trend lower as the cheaper
end of the market grows, Roh said Samsung should be able to make up
for lower margins with stronger volumes once it revamped its product
lineup. The firm has released new premium smartphones such as the
Galaxy Note 4 in recent months, featuring metal frames in a bid to
address complaints about the use of plastic in the past.
Samsung also aims to launch more cost-competitive devices in the
mid-to-low end segments. Analysts expect these products to appear by
the end of October.
Nomura said in a note to clients in late September that Samsung
would release a new mid-tier product late this month valued at
between $300 and $400. The new device would use similar components
to the flagship Galaxy S5 smartphone, priced at about $500, the
brokerage said.
Samsung's chip division is a lone bright spot. The world's top
memory chip maker said returns from its memory business in the third
quarter improved sequentially due to strong seasonal demand.
On Monday Samsung revealed plans to spend $14.7 billion on a new
chip facility near Seoul - its biggest investment in a single plant
- as it leans on its semiconductor business to offset weakness in
smartphones.
(Reporting by Se Young Lee; Editing by Stephen Coates)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
