Samsung seeks smartphone revamp to arrest profit slide

[October 30, 2014]  By Se Young Lee

SEOUL (Reuters) - Samsung Electronics Co Ltd on Thursday said it would revamp its smartphone line-up to take on competitors in the rapidly growing mid-to-low range segment, after third-quarter earnings set it on course for its worst year since 2011.

The global smartphone leader's market share declined in annual terms for the third straight quarter in July-September, lagging Apple Inc <AAPL.O> in the premium market and overtaken by rivals like Lenovo Group Ltd <0992.HK> and Xiaomi Inc at the bottom end, research firm Strategy Analytics said.

Executives said the South Korean giant would overhaul its lower-tier line-up to boost price competitiveness and use higher-quality components to set its devices apart, after it announced its worst third-quarter profit in more than three years.

"The mid-to-low end market is growing rapidly, and we plan to respond actively in order to capitalise on that growth," Samsung Senior Vice President Kim Hyun-joon said during a conference call with analysts.

Samsung said its third-quarter operating profit fell by an annual 60.1 percent to 4.1 trillion won ($3.9 billion), matching its guidance issued earlier this month.

While the company expects profits to pick up in the fourth quarter on strong demand for televisions and memory chips, analysts still expect Samsung to record its worst annual operating profit in three years.

Profit for the mobile division fell 73.9 percent to 1.75 trillion won in the third quarter, its worst performance since the second quarter of 2011.

Samsung spent most of the quarter without launching a new flagship device, and continued to struggle in the mid-to-low tier markets against cheaper and value-packed offerings like Xiaomi's Redmi 1S.

Robert Yi, Samsung's head of investor relations, said the firm would launch new mid-tier models in the fourth quarter, although he didn't specify what features they would have.

Samsung expects average selling prices for handsets will rise in the fourth quarter due to an increase in premium smartphone sales, namely of the Galaxy Note 4, and as demand picks up in the holiday shopping season.

Analysts say Samsung will likely have to sacrifice margins to protect its market share. Cheaper phones are expected to drive global smartphone market growth in coming years, meaning a general trend of lower average selling prices.

Samsung's chips division was a bright spot, recording a 2.26 trillion operating profit for the July-September quarter to mark the highest earnings since the third quarter of 2010.

(1 US dollar = 1,053.5000 Korean won)

(Reporting by Se Young Lee; Editing by Stephen Coates)

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