Samsung Electronics Expect Third Quarter Profit Decline

Samsung Electronics Expect Third Quarter Profit Decline

The operating profit of Samsung Electronics is expected to decline by almost 60 percent, according to the South Korean electronics giant. The decline comes three months after the company revealed that the second half of the year continues to be challenging.

The quarter that ended on September 30 is expected to see a decline of 59.7 percent compared to the same period last year. Sales are also expected to see a decrease of around 20 percent. Although a marginal increase in smartphone deliveries was noted, increasing marketing expenses and lower prices for high-end devices of the company affected these margins.

The third quarter was expected to be tough for Samsung Electronics as the company is anticipated to experience its biggest decline in around half a decade. Analysts indicated that the operating profit of the company was expected to decline by 42 percent while sales would drop by 14 percent.

Mark Newman of Sanford Bernstein said the poor smartphone performance may affect the third quarter earnings of the company. The increasing strength of Huawei and Xiaomi in emerging markets has put pressure on the biggest smartphone vendor in the world. It is also facing competition in the high-end mobile device market from Apple.

The South Korean electronics giant is the only company among the five biggest smartphone vendors in the world to see a decline in year-over-year shipments for the second quarter. The market share of Samsung in the world is expected to go down from 31 percent this year to 25 percent by 2015.

The company revealed that the decrease in sales in the second quarter was due to the excess inventory in Europe and China. The competition in prices also affected its earnings since it was difficult to sell 3G devices in the Chinese market as it starts to move into 4G LTE technology. These are some of the factors along with a 30 percent decline in profits for its mobile division in the previous quarter that compelled Samsung Electronics to indicate a challenging second half of the year.

Posted by James Fried on Wednesday October 08 2014, 4:42 AM EST. Ref: CNET. Link. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0