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.

    1. First off, if Samsung dies, where will Apple go to get their components? It is not as if being a component manufacturer is Apple’s wheel house.

      Second, what “revenge” are we speaking of? Apple’s share of the smartphone market dropped too. This is not Apple beating Samsung, but Samsung’s Android competitors – many of whom make better products on the hardware and software side than Samsung – selling more phones and gaining traction.

      If the American market starts to get some of the quality, moderately priced Android phones that are now being sold in Asia and Europe, that is when Samsung will really start hurting. But of course, that still will not translate into more iPhone sales. What hurts Samsung does not necessarily help Apple. If anything, the increased competition may force Samsung to stop wasting money on marketing and to start taking R&D seriously.

      1. In my view there are 2 big differences between Android and Apple fans.
        First, privacy and security. Google plays fast and loose with both. I don’t like being forced up with ads for something I have already researched and purchased. I’ve moved on.

        Second, I want a smart phone that can be updated to the latest offering. In androidville, lots of middle men deciding if I will be allowed to do that or not. In Apple land, it’s a function of hardware only, and the hardware is always good for at least several upgrades.

  3. Couldn’t happen to a more deserving company.

    ” You can fool some of the people most of the time and most of the people some of the time but you can’t fool all of the people all of the time”

    Marketing can get you so far but in the long term, if your product is crap then sooner or later the customers will wake up.

    Look at Dell, Blackberry, Nokia, HP, Microsoft et-all and wonder why these titans have fallen into irrelevance.

    Samsung has zero customer loyalty, if another vendor has a more attractive deal (notice I did not day better product) they will drop Samsung in a heartbeat.

    1. Dell is still very much around and is still a leading maker and seller of PCs.

      Nokia made great, ahead of its time products. Had they went with Android instead of Windows, they would still be doing so. And their non-mobile division (the one that they did not sell to Microsoft) is very profitable, selling good services and doing great R&D. Had Nokia gone with Android instead of Windows, they would be giving Samsung a real run for their money. They would dominate in India and be the #3 smartphone maker in America.

      HP makes very good tech. (You are aware that HP makes more than PCs.) Their problems have been entirely management.

      Blackberry practically invented the smartphone. Their products have very high quality, and to this day they are still the best product in terms of security.

      Samsung has plenty of customer loyalty. Plenty of companies make better Android phones – as a matter of fact nearly all of them do – yet Android folks keep coming back to Galaxy. It has taken years of multiple Android manufacturers putting out better hardware, having better skins than Samsung’s horrible PowerWhiz AND selling their devices cheaper for the competition to FINALLY gain traction.

      In other words, pretty much everything that you said in your comment was false. Every. Single. Thing.

      1. He said: titans that have fallen into irrelevance.

        Dell: they are doing so well Mike Dell had to ‘shut the company down and give the money back to the shareholders’.

        Nokia: once upon a time they were great. Where are they now in terms of the product that made them a worldwide name? Irrelevant.

        Microsoft: still making tons of money from their monopoly in PCs. But where are they in the fast advancing world of mobile? Irrelevant.

        HP: yes, makes good tech. But how relevant are they now in mobile computing?

        Blackberry: inventors of the smartphone and best in class security. True. How relevant are they now in mobile computing? Practically slipping into obscurity.

        Samsung : hate to say this, but you got this one right. It’s weird they have customer loyalty but I guess there’s just no accounting for taste 🙂

        4 right out of 5 isn’t too bad by any standard. Certainly not ‘Every. Single. Thing.’

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