Hit hard by Apple’s iPhone 6/Plus, Samsung expects first annual profit decline since 2011

“Samsung Electronics Co Ltd on Thursday confirmed expectations for its first annual profit decline since 2011,” Se Young Lee reports for Reuters. “The South Korean tech giant lost market share for three consecutive quarters up to July-September, and analysts say the trend likely continued in the October-December period thanks to competition from Apple Inc’s new iPhones and cheaper Chinese rivals like Xiaomi Inc.”

“The outlook means Samsung’s 2014 profit will probably be 25 trillion won, the weakest in three years, although it marks a rebound from the third-quarter’s 4.1 trillion won profit which was the firm’s lowest quarterly result in more than three years. The company is expected to release its annual results around the end of January,” Lee reports. “The mobile division’s contribution to Samsung’s profit has slipped from about 68 percent at its peak in 2013 to about 44 percent in the third quarter, as its high-end offerings lost out to Apple’s iPhones.”

Lee reports, “Analysts say the company’s new focus on mid-to-low tier smartphones will squeeze margins and cap profits, offsetting the benefits of the expected increase in sales.”

Read more in the full article here.

MacDailyNews Take: The more pain for beleaguered Samsung, the better!

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18 Comments

  1. I was just watching an interview with the VP of Samedung and he worked tirelessly to dodge the reporter’s question about their failing copy-phone. He kept pushing the reporter toward the “internet of things”. The reporter got agitated and said to him that he is just deflecting a failing phone business. The VP looked stunned. For me, this represents the fact that Samedung has internalized the fact that their phone business will be over soon.

    1. With their “Internet of Things” push, they do need to start adding HomeKit integration into their products… Not to downplay Android users, but studies have shown that Android is popular because of cost… These are not the consumers that are going to pay for automated/remote controlled electronic “housewares”. If Samsung tries to lock all their appliances and devices into their own ecosystem, it will fail miserably.

      Apple has the high-end of the smartphone, tablet, and computer markets locked up – these are exactly the same users that can and will pay for HomeKit enabled devices and appliances. The players in that market know this and is why when Apple dumps a protocol/platform on the market (iBeacons, HomeKit, HealthKit, MFi, etc.), most companies are willing to adopt it. In marketing and monetary terms, Apple’s user base is the “cream of the crop”.

    2. Companies are always talking about the “internet of things” which is so damn vague a term. I thought Google was supposed to be the leader of the “internet of things.” Being the leader of the “internet of things” is highly overrated and seems more like some stupid mumbo-jumbo term Wall Streeters would use to boost companies’ value instead of actual value. A company either has a successful definable product or they don’t. How’s that Nest thermostat “thing” working out for Google currently?

      1. The problem is that Google is not a leader. Google doesn’t know how to lead. Throwing out half baked ideas as beta products is not leadership, nor will that model work in integrating home appliances into the modern connected world.

        The internet of things is not mumbo-jumbo. You simply don’t understand the ramifications of real time retail pricing in the electric utility industry. There are very real needs and advantages to having flexible, smart, connected appliances and systems for home management. If a utility company can shave 10% off its 2 hour long, 6 pm peak load by offering pricing incentives through automated systems it can avoid doubling its wholesale power costs for the day by buying extra capacity from the regional grid. The traditional remedy for that situation is to spend another $250M on a power plant that runs a few hours a day, the cost of which gets passed on to the rate payers in the form of higher rates for electricity consumption. In order to avoid going the traditional route utilities need time-of-use pricing, which can only be implemented using “smart” meters that parse and return usage data every few minutes all day long. These internet connected meters are the first step in time-of-use pricing and are already in place in many areas of the US. The next step is for appliances to know when electricity is cheap and schedule themselves to run at that time. That information is already available from the “smart” meters. It’s just a matter of getting the new technology in place in new appliances and other home systems.

        The Nest thermostat was a prime example of what could be achieved, and it was headed toward market domination until Google bought it. Now it has lost focus and people, frankly, don’t want Google in their living rooms 24/7. When I worked for a large public utility in the capacity of systems administrator, using “smart” metering we could tell what energy options they used, what their work/school schedule was, how many people of what ages were in the family, their economic status, and much more by analyzing their electricity usage at 15 minute intervals over a long period of time (we actually identified indoor marijuana grow sites and referred them to law enforcement). This is why Google bought Nest, not to further advance a great product, but to develop a whole new area of customer data to sell to advertisers. That’s why Nest now languishes in never-never land.

        The internet of things is coming. It’s development is being driven by huge market forces applied to very large and lucrative industries. It has serious implications around government regulation and privacy. Hardly anyone understands the big picture yet, but it’s definitely coming.

    3. Samsung isn’t going to give up their Samsung business as long as Apple’s business is still going strong. I think it’s a matter of company pride. They seem to be certain that Apple is just lucky and will eventually fall to Samsung’s flood of smartphone models. Average consumers are only going to fall for so many gimmicks on a smartphone. All those features might impress tech-heads but they’re few and far between when it comes to solid sales.

  2. The only meaningful profit Samsung has been able to make on mobile phones was on high-margin phablets and large models, where there was no competition from Apple. Now that such competition exists, Samsung can only sell their devices at significantly lower prices.

    I was one of those who argued that ‘phablets’ and large-screen phones were a marginal market at best and that Apple needn’t bother. And I was one of the first (if not the only one) to admit I was wrong on that, as soon as 6/6+ showed up. It is clear that the market exists, and that it wasn’t just made by Samsung in an effort to be different from Apple. The market is genuine, and Samsung has just lost the last available segment in which they could actually make a decent profit on a mobile phone.

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