Samsung Electronics posted the smallest quarterly earnings in more than two years as profit margins are squeezed by competition from Apple's new iPhones and cheaper Chinese devices.
Net income, excluding minority interests, fell 49 per cent to 4.14 trillion won (€3.17 billion) in the three months ended September, the South Korea-based company said in a filing today.
Samsung faces the strongest challenge yet to its reign as the world's biggest smartphone maker with the iPhone 6 models winning customers in the large-screen market and Xiaomi and Lenovo attracting budget buyers in China.
The squeeze is hurting Samsung’s other businesses, curbing earnings at its display and processor chip divisions, as it prepares to release phones with flexible screens in 2015.
“Samsung has lost touch with its customers as it has been unable to differentiate its offerings from established and emerging competitors,” said Dan Wagner, the London-based chief executive officer at Powa Technologies.
“The jury is out if Samsung will recover in this tough, saturated market.” Samsung “cautiously expects” an increase in fourth- quarter profit on seasonal demand for TVs, with flat-panel shipments forecast to rise 40 per cent, and growth at the chip division, the company said in an e-mailed statement.
Shares of Samsung rose 4.5 per cent to 1,181,000 won in Seoul trading, paring this year’s decline to 14 per cent.
The earnings slump comes as chairman Lee Kun Hee recuperates from a heart attack in May and as his family prepares to hold initial public offerings for other parts of Samsung Group, South Korea’s largest family-run conglomerate.
Operating profit for the quarter was 4.06 trillion won while sales fell to 47.45 trillion won, the lowest in more than two years.
At the mobile unit, which had been the biggest contributor to earnings since 2011, operating income slumped to 1.75 trillion won from a record 6.7 trillion won a year earlier.
Samsung introduced two new Note devices with larger displays last month as it tried to blunt the impact of the new iPhone 6 and iPhone 6 Plus that debuted September 19.
Profit margins on smartphones are falling as competition pushes down the average selling price and Samsung boosts marketing spending to rekindle growth. That pressure will continue in the “near-term,” the company said today.
Bloomberg
