Mobile glut slashes Samsung earnings

Mobile glut slashes Samsung earnings

Samsung Electronics estimated its third-quarter operating profit will fall significantly as the company's flagship smartphone business continued to struggle with market saturation and the emergence of strong new rivals.

On Tuesday, the world's largest smartphonemaker put its quarterly operating profit at 4.1 trillion won (S$4.84 billion) to reflect an almost 60 per cent fall on-year. The figure is about 43 per cent lower than the 7.19 trillion won in operating profit in the second quarter, the firm said in a regulatory filing.

Sales for the third quarter were estimated at 47 trillion won, down 20.45 per cent from the 59 trillion won a year before. This marks the first time in three years that Samsung's quarterly operating profit has fallen below 5 trillion won since the fourth quarter of 2011, when the figure was 4.6 trillion won. Its quarterly earnings were below the 50 trillion won mark for the first time in two years.

Final earnings are to be released later this month.

The estimates were almost in line with the market estimate of 4.4 trillion won provided Thursday by Yonhap Infomax, the financial news arm of Yonhap, based on a poll of 22 brokerage houses. LIG Investment & Securities had suggested the lowest estimate of 3.9 trillion won.

Samsung attributed the weak earnings to its ailing IT and mobile business.

"Smartphone shipments increased marginally amid intense competition. However, the operating margin declined due to increased marketing expenditures and a lower average selling price driven by reduced proportional shipments of high-end models coupled with price decreases for older smartphone models," the company said.

"For the System LSI and OLED panel businesses, shipments decreased and profitability weakened due to lower demand for mobile products," it added.

"Under typically weak seasonality, earnings for the CE business declined substantially on-quarter due to reduced ASP of TVs and an earlier-than-expected end to the peak summer sales season of home appliance products, such as air conditioners," Samsung also said.

Analysts here, which had already anticipated such gloomy earnings, have been rushing to slash their third-quarter earnings outlooks for Samsung Electronics since the firm released disappointing reports for the previous quarter, as the tech giant still has no game changer to boost its profits.

While Samsung did not reveal earnings estimates for individual business sectors, analysts expect its mainstay handset unit will continue to post weak earnings, with its operating profit falling even below that of the chip arm.

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