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Samsung posts first profit slump in two years as smartphone sales stall

Buyers likely holding off for the Galaxy S5
Fri Jan 24 2014, 10:22
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KOREAN PHONE MAKER Samsung posted its first profit decline in two years on Friday due to slowing sales of its smartphone devices.

While Microsoft beat analyst estimates with record earnings, Samsung posted $7.7bn in operating profit for the fourth quarter on Friday, an 18 percent drop compared to the third. This marked the firm's first quarterly decline in profit in two years and saw Samsung's net earnings slip six percent year on year.

The dip in earnings was due in part to a decline in smartphone sales, with the firm's mobile division seeing profits slip 2.8 percent quarter on quarter. This could be because customers are holding out for the long-rumoured Samsung Galaxy S5, which reportedly will launch ahead of this year's Mobile World Congress on 23 February, or possibly because the firm's sales were hit by the launch of Apple's iPhone 5S and iPhone 5C handsets.

Strategy Analytics research analyst Nel Mawston said, "A flood of Asian rivals from China and India, such as Lenovo, as well as a product refresh from Apple, are pressuring Samsung at the moment.

"The upcoming Galaxy S5 smartphone will help to stabilise profits, but it is unlikely to regrow them in such a crowded market."

However, Samsung claimed that its smartphone lineup sold well during the quarter, adding that tablet sales almost doubled.

Samsung said that the drop in profit was due to a $745 million bonus paid to its employees during the quarter, and noted that the Korean Won is rising against other currencies, causing foreign exchange loses.

Samsung doesn't expect to turn its fortunes around immediately, admitting that it will likely face challenges in the first quarter as well.

"For the first quarter it will be challenging for Samsung to improve its earnings as the weak seasonality of the IT industry will put pressure on demand for components and TV products," the firm said.

Samsung's arch rival Apple will release its fourth quarter financial results on Monday. µ

 

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