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Samsung’s profits fall 20 percent as Galaxy S5 sales disappoint

Tablet sales also struggling
Thu Jul 31 2014, 10:17

Samsung Galaxy S5 with Android 4.4 Kitkat in goldSAMSUNG ANNOUNCED its second quarter earnings on Thursday, revealing that its profits slipped almost 20 percent despite the launch of its flagship Galaxy S5 smartphone.

There have been many reports claiming that the Galaxy S5 hadn't sold as well as expected, with analysts claiming that the device was failing to match sales of the iPhone 5S and iPhone 5C handsets.

Samsung all but confirmed this in its second quarter financial report, revealing that net profit came in at 6.25tn Won ($6.1bn), down 19.6 percent year on year and the firms' first profit decline in almost three years. This shouldn't come as too much of a surprise however, as Samsung warned of a weak second quarter earlier this year.

Operating profit stood at 7.19tn Won, down 24.6 percent from a year ago, while sales tumbled 8.9 percent to 52.35tn Won.

The firm admitted that this was due to slowing sales of its smartphone devices along with tablets, saying in its earnings report, "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 firm also blamed higher than expected manufacturing costs associated with the Galaxy S5, and exchange rates that didn't work in its favour.

Looking to the second half of the year, Samsung said that business likely will "remain a challenge". However, it said that it expects to see gains in the third quarter driven largely by sales of its premium television line.

The firm doesn't seem so optimistic regarding smartphone sales, though, saying in its report, "Prospects for growth remain unclear as competition over global market share intensifies in the mobile industry.

"Samsung expects to see its sales of mobile devices increase with the rollout of flagship products and new models, but profitability may suffer due to a heated race over price and product specifications." µ


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