Samsung’s net profit declines on weaker-than-expected phone sales

“Samsung Electronics Co. said Thursday its net profit fell for the first time in nearly three years in the second quarter on weaker-than-expected smartphone sales,” Min-Jeong Lee reports for The Wall Street Journal.

“The world’s biggest mobile-phone maker by shipments said in a statement that net profit fell 19.6% from a year earlier due to mismanagement of inventory, stiff competition and a recent spike in the local currency that made its products less competitive overseas,” Lee reports. “Operating profit at its mobile division—its biggest profit generator—fell 30% as the company faced more competition from Apple Inc. and a flurry of low-cost Android phone makers.”

“The company said the second half “will remain a challenge”, as profitability in its mobile unit may suffer due to a heated race over price and products,” Lee reports. “The decline comes ahead of the highly-anticipated launch of big-screen iPhones in the second half, which is expected to challenge Samsung… Samsung said operating profit slid 24.6% from a year earlier to 7.19 trillion won, as the company’s core mobile unit was hit by bigger-than-expected inventories for its smartphones in the mid-to-low-end segment.”

Lee reports, “Operating margin from the division fell to 15.5% from 17.7% a year earlier, reflecting the company’s hefty spending on marketing to clear out excess inventory. Samsung didn’t disclose how many smartphones it sold…”

Read more in the full article here.

MacDailyNews Take: Gee, that’s too bad. (pops cork!)

Related articles:
IDC: Samsung phone shipments down 4%, Apple iPhone up 12% – July 30, 2014
In China, Apple’s focus pays off while Samsung feels painful squeeze – July 24, 2014
Samsung losing ground on two fronts as Apple readies hotly-anticipated iPhone 6 – July 16, 2014

41 Comments

    1. Except that most of Samsung’s sales declines were due to other Android manufacturers, not Apple. This is a good thing, because increased sales for other players means more Android manufacturers making money, which is good for quality, innovation, and value (pricing) for the customer. Lenovo/Motorola is turning a profit, LG and HTC are break-even, Acer, Asus and Sony are just below profitability (mostly due to having a small presence in the U.S. due to carrier issues), and Xiaomi and Huwai are making real profits (especially Xiaomi). So, bad for Samsung is actually good for Android.

      Besides. Samsung is fine. Their profits are declining, but make no mistake they are still PLENTY profitable. The good news is that thanks to the rise of quality mid-range devices that provide decent sales AND margins, there are now enough profits in the Android space to go around.

      1. Yes, the low end functionality is going up. That does NOT inherently mean the quality is going up. The two are independent of each other.

        Samsung’s mobile division’s profitability dropping by 30% is a huge concern for them. That large a drop in the second most profitable cell phone manufacturer puts them back into the pack of second tier, profitable, but only moderately so companies. It is even possible that one of the Chinese companies will overtake Samsung’s unit shipments and profitability position within the next year.

        Is Samsung headed the way of Blackberry or Nokia in the near future? I doubt it. They’ll keep doing knock offs of everyone else’s flagship products. They’ll get sued and drag out the lawsuit for 5+ years until it’s no longer worthwhile for the suing party. (Notice how Apple already has stopped some aspects of its lawsuits against Samsung because they are no longer relevant.)

        But, long term? Samsung needs to turn the ship around or it just might sink.

  1. Keep up the Boycott of all Samsung products!! I believe that a lot of small voices and actions have begun to roar. And karma is making sure that Samsung is Painfully aware of that.

    1. My wife wanted to buy a £600 “American style” fridge freezer last weekend. We ended up buying a £900 one by another manufacturer. I was happy! I can’t remember the brand we ordered but I made damn sure it wasn’t Samsung.

      1. ‘Butt muncher’, from my point of view, is someone who is a low life human trying to please another person be debasing themselves. Other words for that behavior are ‘sycophant’, ‘boot licker’ and ‘quisling’.

        ‘Bottom feeder’ is definitely applicable to Samsung. The food is the same, but a bottom feeder goes trolling for it after the act of dung excretion.

        Both behaviors are of course a bad idea.

  2. Marketing will only get a company so far and if the products do not meet expectations the company’s demise will quickly ensue. Almost every single Samsung product I have come in contact with has one or more issues. This includes, two Galaxy S3 phones (complete failure) a high-end Windows tablet computer (HDMI doesn’t work) one high-end smart TV (always drops internet connection) two panel TV’s (picture is dark on one and sound is too low on both), a blue ray player (doesn’t play blue rays) and a washing machine (failed after one week) = thousands of dollars of CRAP!

    1. SUUURE, a died-in-the-wool Apple fan has so much experience with Galaxy phones, Windows tablets and smart TVs. RIIIIGHT. I TOTALLY BELIEVE YOU.

      It is funny … the only people who believe that Samsung and Android products are junk that do not work are … Apple fans. The actual HUNDREDS OF MILLIONS OF PEOPLE WORLDWIDE who buy and use these products state that they love and are happy with them.

      Gee … wonder why that is? Like I said folks, it is not as if alternatives do not exist. If Android was as bad as you guys claim, Windows Phone would have a much larger market share.

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