Samsung Getting Hammered in Financials; Expects 60% Profit Drop Year Over Year

[dgstorm]

That's going to sting a bit! Samsung is predicting they will have a 60% profit loss in the year over year quarterly financial outlook. Samsung blames the profit loss on lagging performance in its flagship mobile division. They shared,

Smartphone shipments increased marginally amid intense competition. However, the operating margin declined due to increased marketing expenditures and a lowered average selling price (ASP) driven by reduced proportional shipments of high-end models coupled with price decreases for older smartphone models.

Ironically, Samsung actually sold more phones this quarter than the previous one, but most of these sales where from lower-end/cheaper devices, which resulted in less revenue and profit. Despite the troublesome news, the profit still amounted to $3.8 billion, which is more than many tech companies make in years. Obviously this is still a troubling trend that Samsung needs to adapt to and change.

What do you think is hampering Samsung's growth?

Source: WSJ

 

[johnomaz]

Not surprised. They've become less and less as a premier Android device OEM and more of the Apple of Android. They create accessories that require other Samsung Devices which is their way of locking you in to their equipment. That turned me off big time. Their devices haven't changed much either just like Apple's don't with the big exception to size. LG tries new things, HTC tries new things, Motorola went to nearly pure android and better prices. When one giant falls, one will come in to replace it. I wonder who it will be.

 

[dgstorm]

I am predicting Motorola will be the new rising Android star...

 

[cr6]

I think them "holding back" their tech is what's hurting them. Obviously this isn't new since the original Galaxy. Each year they release a new device which is a minor upgrade over the previous year. (Which is why I went with the S1, S3 & S5...along with being stuck on contract with the first two) Obviously it's attractive to those "on contract" because every two years they get a sweet upgrade, but I think this could be contributing to their profit loss as more & more people move off contract. This is finally catching up to them.
The whole "Alpha/Galaxy F" thing was a huge let down and I think it's time they stop holding back their tech (At least hardware-wise) and start loading their flagship models with the largest processors, memory & batteries they have at their disposal. When people put out 6-8 hundred bucks on a new device, they want the best specs possible. If Samsung isn't going to offer what the people want, they'll go somewhere else. (Which was evident this past year) Especially since you can't go wrong with any flagship model these days, regardless of the manufacturer. Samsung is realizing they're no longer the largest dog in the kennel. Time to make some changes Samsung, or stay on the porch!

tap'n on my S5

 

[shockracer]

Not surprised. They've become less and less as a premier Android device OEM and more of the Apple of Android. They create accessories that require other Samsung Devices which is their way of locking you in to their equipment. That turned me off big time. Their devices haven't changed much either just like Apple's don't with the big exception to size. LG tries new things, HTC tries new things, Motorola went to nearly pure android and better prices. When one giant falls, one will come in to replace it. I wonder who it will be.

IMO, you hit the nail on the head.

I also think people are getting tired of TouchWiz. It bogs down the phone and has so much extra options most people i talk to just want them turned off.

 

[soulpatch]

I disagree on the decline of Samsung. Sure they took a one year hit focusing their efforts on developing markets like China but that will serve them well in the years to come. As those markets mature they move into the more expensive phones and if they can integraqte the new consumers into their ecosystem then they make out better in the end. Apple is doing the same thing taking loses ont he iPhone to get into these emerging markets since they know once you get a customer it is more likely they stick with you.

I also dont see much innovation coming from any of the phone manufactorers right now. I think we have hit a plateau and as such people are not throwing down the money for the next years model since theirs is still sufficient. My Note 2 really shows no real signs of fatique for me to upgrade. I am going to get the Note 4 (or the edge if they ever say when it is coming out) but I am only doing so since I want to not need to. There have not been a ton of upgrades in the phone since my note 2. Now go back a couple years and with LTE and everything else there were huge jumps.

Samsung in the next couple years will reap the benefits of pumping out lower cost phones and diverting their attention short term from innovating to growing an emerging market.

 

[dgstorm]

You make some great points. It will be interesting to see how they adapt.

 

[cereal killer]

I'm sure all the manufactures have long ago figured it out that the low end/cheaper phones and emerging markets is where they need to have a huge presence. Yes their margins are a lot..ok massively smaller, but this is the trend and its not going to change anytime soon.

Also worthy of mentioning, people are holding onto their top tier smartphones longer and owning one really is a luxury that a majority of people simply cannot afford (or don't want to pay) IT goes without saying that the top-tier smartphone space is oversaturated.

I'm sure a year from now we'll start to see manufactures already slowing their high end smartphone release schedules and shifting focus to emerging markets/cheaper smartphones.

 

[Ollie]

Samsung's phones don't hold back on tech. They are priced too high. Which Android OEM has a better spec'd phone than Samsung? No one. Which Android OEM has a better priced phone than Samsung with the same specs? A lot of them.

Aside from the Note series which Samsung has excelled in the rest of their devices are caught in the quagmire that we often take for granted...many choices.

Touchwiz isn't the elephant in the room either. It had a lot of lag issues earlier on in its life, but I haven't had lag since the S4.

 

[cybertec69]

It's called market saturation people, it is effecting all manufacturers, it has happened also to Apple. There is less of a need to upgrade since most of todays smartphones do everything quite well, heck my close to 4 year old S3 "my backup" still hums along just fine, and my S4 does everything I need it to do with ease, and that goes for many of todays and yesterdays phones. The next big market is China and India "low cost phones", no one needs a top tier smartphone to do the basics like surfing the web, social networks, picture taking, email and text, a little gaming, and making a phone call "some people still do". Even Apple with their new iPhone 6 had big initial sales do to the newness and the bigger screens "which many, not all iPhone owners where waiting for", the majority of people that upgraded where the ones that owned the older iPhone5 and iPhone 4, people with the iPhone 5s will not jump on it so quickly, same thing happened when the iPhone 5s came out, people with the 5 did not go crazy to upgrade. Especially with todays economy and people having less discretionary spending power.

The same thing happened to the PC market, there is less reason for people to upgrade since most if not all software still work with 5 year old PC'S, heck my self build Intel Core2 Duo PC still runs like a champ. Even my 5 year old laptop.

 

[Yellowhammer]

You all make good points.

Samsung received a huge sales boost starting in 2011, as Motorola fans moved to Samsung due to developer support. Many of these same people have been leaving Samsung for the same reasons. I think this contributes to the high-end sales drop.

 

[Jeffrey]

I'm sure all the manufactures have long ago figured it out that the low end/cheaper phones and emerging markets is where they need to have a huge presence. Yes their margins are a lot..ok massively smaller, but this is the trend and its not going to change anytime soon.

Also worthy of mentioning, people are holding onto their top tier smartphones longer and owning one really is a luxury that a majority of people simply cannot afford (or don't want to pay) IT goes without saying that the top-tier smartphone space is oversaturated.

I'm sure a year from now we'll start to see manufactures already slowing their high end smartphone release schedules and shifting focus to emerging markets/cheaper smartphones.

I totally agree. Moto and Google are focusing on emerging markets. Sammy joined in as well. India and China is where their profits will come from while top tier phones are just the gravy.