Samsung’s profits drop to €5.49bn as low-cost mobile market makes gains

29 Apr 2014

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Image via 360b/Shutterstock

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Samsung’s financial results for the first quarter of 2014 have exceeded analysts’ and its own expectations, though the company has posted its second quarterly drop in operating profit and mobile market share slipped for the first time in four years.

The South Korean electronics manufacturer announced on Monday an operating profit of 8.49trn South Korean won (€5.94bn) for the three-month period ending 31 March – 3.3pc less than the same period last year.

However, the results were slightly better than was advised by Samsung’s guidance, released earlier this month, and just above the analysts’ average prediction of 8.4trn won (€5.8bn).

Mobile being eaten from the bottom

Samsung’s mobile division generally accounts for two-thirds of its revenue, but the Galaxy smartphone-maker is being squeezed at both ends of the market, facing tough competition at the top from rivals such as Apple and increasing opposition in the low-cost market.

According to the latest figures from Strategy Analytics, Samsung’s global mobile market share dipped for the first time since Q4 2009. In the first quarter of 2013, Samsung held 32.4pc of the worldwide mobile phone market, but this has dropped to 31.2pc in the same period this year.

Samsung is still world No 1 in terms of mobile market share, though, with Apple also seeing a decline from 17.5pc to 15.3pc in the same period.

The rival tech giants are losing market share to low-cost Chinese electronics manufacturers such as Lenovo, which saw a rise from 3.9pc to 4.7pc, and Huawei, which saw 13.4m units sold and maintained its share of 4.7pc.

All told, Samsung’s Q1 operating profit for its mobile division saw a slight decline from 6.51trn won (€4.54bn) last year to 6.43trn won (€4.47bn), but a 17pc increase from the previous quarter.

World Cup boost

Overall, Samsung’s sales in Q1 2014 rose 3pc year-on-year to 53.68trn won (€37.54bn). The company expects earnings to improve in the next quarter, with a lift provided by sales of the Galaxy S5, which wasn’t released in time to impact on the first-quarter results.

Samsung is also a leading provider of components such as display panels to other manufactures, and also expects demand in this market to give it a boost. “Orders for display panels that are used for premium smartphones and TVs are expected to increase, as new mobile devices are rolled out into the market and as consumers look forward to the upcoming World Cup in Brazil,” said a statement from the company.

Samsung image by 360b via Shutterstock

Elaine Burke is managing editor of Siliconrepublic.com

editorial@siliconrepublic.com