Samsung Q2 profits down nearly 20 per cent as cheap Chinese devices flood the market
Samsung
has expressed cautious optimism about a more positive third quarter, but
competition is set to heat up with the expected launch of the iPhone 6. Source: News Corp Australia
Samsung Electronics on Thursday reported
a near 20 per cent decline in second quarter net profit, due to increased
competition from cheap Chinese devices in the key smartphone sector and a
surging Korean won.
The South Korean electronics giant posted a net
profit of 6.25 trillion won ($6.1 billion) -- its lowest figure for two years
and down 19.6 per cent from the same quarter last year.
Operating profit stood at 7.19 trillion won, down
24.6 per cent from a year ago, while sales tumbled 8.9 per cent to 52.35
trillion won.
“The second quarter was affected by several
factors including the slow global sales of smartphones and tablets and
escalating marketing expenditure to reduce inventory,” the company said in its
earnings report.
“The appreciation of the Korean currency also
chipped away at this quarter’s operating profits, which amounted to about 500
billion won in missed revenues prompted by the foreign exchange market,” it
said, adding that the second half of 2014 would “remain a challenge”.
The won is currently running at six-year highs
against the dollar, impacting South Korea’s export-driven economy.
Thursday’s figures were in line with earnings
estimates released earlier this month, when Samsung also issued an explanatory
note attributing the profit decline to increased competition from cheap Chinese
devices.
Samsung had expressed cautious optimism about a
more positive third quarter with the release of its new smartphone line-up, and
a much lower marketing spend compared to the second quarter.
However, the next quarter will also see the
competition heat up with the expected launch of the iPhone 6 by chief high-end
rival Apple.
Alarm bells have been sounding for a while over
Samsung’s reliance on smartphone sales in mature markets such as Europe and the
United States, and emerging markets like China.
The world’s largest smartphone maker has a
diverse product line ranging from memory chips to home appliances, but more
than half of its profits are generated by mobile devices.
April saw the global rollout of the latest
version of its flagship Galaxy series smartphone, the Galaxy S5, which came
with a free premium software bundle valued at more than $500 as Samsung sought
to pull in buyers tempted by cheaper models from Chinese rivals like Lenovo and
Huawei.
Initial sales of the S5 were positive, although
critics said it offered little in the way of real innovation to set it apart
from the iPhone and the Chinese phones.
There is a general consensus that smartphone evolution
has hit a barrier that will only allow incremental improvements on existing
design and technology, rather than market-changing reinvention.
According to International Data Corp., a
record-high 295.3 million smartphones were shipped worldwide in the second
quarter.
Huawei nearly doubled its shipments from the same
quarter a year ago, while Lenovo also weighed in with strong performance, IDC
figures indicated.
Samsung remained the world’s top vendor with 74
million handsets shipped, but saw its overall market share slip seven per cent.
Make over $70,000.00
using the following link to create your unique eBook
No comments:
Post a Comment