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| The Korean company also intends to improve its software. |
Samsung Electronics Co Ltd on Tuesday offered a forecast of suddenly weak
quarterly earnings that directs the company to its bad results in 2 years
and calls into question the strategy of leading smartphone versus their cheaper
Chinese rivals.
The South Korean company is facing a slowdown in market growth, intensified competition price at the decrease end and the threat of imminent next iPhone Apple Inc.
The South Korean company is facing a slowdown in market growth, intensified competition price at the decrease end and the threat of imminent next iPhone Apple Inc.
"Earnings offer a hard reality check that Samsung is not Apple, but Samsung. Their strategy of selling expensive phones at prices not work anymore, at a time when Chinese rivals also offer good sufficient phones at much less costly prices "said Lee Seung-woo, an analyst at IBK Securities technology.
"Samsung has to review its smartphone strategy," he added.
"Samsung might be forced to cut handset prices medium
to low level"
While smartphones led Samsung to record profits past year, the market is growing.
Research firm IDC forecasts that global shipments growth will slow to 19.3 percent this year from 39.2 percent in 2013, while average selling prices will also be reduced.
Some analysts said that Samsung might be forced to cut handset prices medium to low level, where growth is stronger to compete with Chinese rivals for example Huawei Technologies Co Ltd and Lenovo Group Ltd.
While that would assist protect its market share, also cut margins, slowing the recovery of their profits in the short-term.
The company said it "expects cautiously" a better outlook for the third quarter with the launch of a new line of smartphones, one reducible in marketing costs and boost seasonal demand in its memory business.
Samsung estimated
its operating profit between April and June probably was down 24.5% from
a year before to 7.2 trillion gained ($ 7.120 billion).
This would be the strongest percentage fall since the first one fourth of 2011 and the lowest since a profit of 6.5 trillion won in the second one fourth of 2012 level.
The guide, which is delivered before the final figures for the end of July, is much less than the 8.3 trillion won average expected 38 analysts polled by Thomson Reuters I / B / E / S.
The result would be the third straight quarterly drop in profits of the company.
Samsung also said its second-quarter sales probably fell 9.5 percent to 52 trillion won.
Sales compared with analyst expectations of 54 trillion won and represent the first annual decline since Samsung followed new accounting standards in 2009.
