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Samsung electronics facing tough times with further profit slide

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According to a report from Reuters, Samsung Electronics Co Ltd. on Thursday reported it’s worst quarterly profit in almost two years and noticed vague earning prospects for its handset business, increasing problems in the market about its capability to return to growth.

Samsung’s decision of not changing the interim dividend from a year has put the company’s share market value on track for their worst daily percentage decline in nearly eight months, though the company expects a real growth in the coming quarter as they are planning to introduce new design and material for their Smartphone.

Those plans were mostly in line with market expectations and Samsung remained downbeat about its third-quarter prospects, with its mobile division expecting a decline in average sales price in the current quarter from the April-June period. "Considering intensifying competition of price and specifications as well as the release of new competing models, it is difficult to expect earnings to improve from the second quarter," Senior Vice President Kim Hyun-joon

Impact to Profit

For April-June, Samsung said operating profit fell 24.6 percent annually to 7.2 trillion won ($7.03 billion), matching its guidance. It was the third straight quarter of profit decline and its weakest result since the second quarter of 2012.
Profit for the mobile division fell to 4.42 trillion won from 6.28 trillion won a year ago, also the lowest in two years.
Samsung shares were down 3.8 percent as of 0432 GMT, underperforming the wider market's 0.5 percent decline.

Samsung's mobile division executives returned a quarter of their first-half bonuses and have downgraded to economy seats for shorter flights, evidence the South Korean tech giant is tightening its belt as it tries to bounce back. But analysts say the pressure on the business to turn momentum around will persist and could lead to a reshuffle if the current management could not deliver. Researcher IDC said on Wednesday that Samsung's second-quarter global Smartphone market share slipped to 25.2 percent from 32.3 percent a year ago, underscoring its troubles. "Nothing on the Smartphone end has particularly changed, and there likely won't be any change in the story aside from effects of cost reduction," said IM Investment analyst Lee Min-hee.

Samsung finds itself facing the first annual profit decline in three years just as Apple prepares to launch a larger iPhone that would challenge them. The weak second-quarter results will put the spotlight on the next Galaxy Note handset, expected to be launched in September. The company once again hinted at a significant change in design for the device but offered no specifics on Thursday as suggested by Reuters

Samsung's chips business reported a profit of 1.86 trillion won, in line with solid results for rival SK Hynix Inc, as tight supply for DRAM memory chips for personal computers and servers boosted the bottom line. Samsung's guidance on its memory business was in an increasing order, tipping its 2014 shipment growth for both DRAM and NAND memory chips to outpace the broader market. Samsung said it planned 24 trillion won in capital expenditure this year, in line with 2013, with 14.4 trillion won of that for its chips business.

Source: REUTERS/BEAWIHARTA

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