Samsung's Q3 Smartphone Sales Results Will Top Apple for the First Time

[czerdrill]

No, shipped has a fairly precise and generally accepted meaning when reporting financials. "Shipped" means to wholesalers/distributors/customers, not your own warehouse. Your definition of shipped is no different from production - there's a reason they are referring to units shipped rather than produced.

There could very well be a reason why they're referring to units shipped rather than sold, too of course. Regardless, we won't know because Samsung doesn't release shipment numbers or sold numbers so its all extrapolation and guesswork. I'm still going to stick with Samsung not selling 20M phones in one quarter simply because of what they've done in the past with the same type of figures (granted its not them saying it this time), but who knows.

 

[jcardona1]

No, shipped has a fairly precise and generally accepted meaning when reporting financials. "Shipped" means to wholesalers/distributors/customers, not your own warehouse. Your definition of shipped is no different from production - there's a reason they are referring to units shipped rather than produced.

You don't know that for sure. We have no idea what kind of agreements Samsung has. I work in finance/accounting, so I see this every quarter. Our company has several funky little agreements. We are a manufacturer. A lot of our inventory is shipped, but not 'sold'. It sits in the warehouses of distributors as 'consigned' inventory. We shipped it, and it's no longer in our warehouse, but we still own it. We don't recognize the sale and the revenue until the good is "consumed" by the 3rd party. Samsung may very well have similar agreements with wholesalers and distributors.

Wholesalers and distributors don't want tons of inventory sitting on their books. That is where these consignment agreements come in. They have our inventory, but it's still ours. It's reported on our balance sheet as 'off-site' or consigned inventory. The wholesaler/distributor has the financial liability to the inventory only when it's consumed. At that point we recognize the sale and remove the item from our inventory. It's basic accounting.

Long story short, shipped DOES NOT always = sold. If they said SHIPPED instead of SOLD, it's because they have not recognized the revenue on these shipments. Reporting them as units SOLD would be misleading, and they know that, that's why they said shipped.

 

[kodiak799]

You don't know that for sure. We have no idea what kind of agreements Samsung has. I work in finance/accounting, so I see this every quarter. Our company has several funky little agreements. We are a manufacturer. A lot of our inventory is shipped, but not 'sold'. It sits in the warehouses of distributors as 'consigned' inventory. We shipped it, and it's no longer in our warehouse, but we still own it. We don't recognize the sale and the revenue until the good is "consumed" by the 3rd party. Samsung may very well have similar agreements with wholesalers and distributors.

Wholesalers and distributors don't want tons of inventory sitting on their books. That is where these consignment agreements come in. They have our inventory, but it's still ours. It's reported on our balance sheet as 'off-site' or consigned inventory. The wholesaler/distributor has the financial liability to the inventory only when it's consumed. At that point we recognize the sale and remove the item from our inventory. It's basic accounting.

Long story short, shipped DOES NOT always = sold. If they said SHIPPED instead of SOLD, it's because they have not recognized the revenue on these shipments. Reporting them as units SOLD would be misleading, and they know that, that's why they said shipped.

I work in finance/accounting, too, with a background in investments. Financial reporting requirements are different from internal (you own your warehouse inventory, it's on your books as inventory and not revenue). "Shipments" has different meaning than "production", and usually means sold to distribution channels but not end customers - legit revenue booked for Sammie. Shipments are expected to convert to end-customer sales shortly, allowing for lag in transit. This is materially different from simple production. What you are implying is channel stuffing, whereby Sammie overships and the customer will end-up sending that back, and it's an unethical, if not illegal, earnings manipulation practice that happens rarely.

And, again, this is not Sammie reporting the numbers, it's an analyst making an extrapolation which is probably at least a ltitle off the mark as Czerdrill noted. But probably closer than most acknowledge because he knows approximately the margin on the phones and it's a simple calculation to extrapolate sales based on reported segment profits.

 

[jcardona1]

What you are implying is channel stuffing, whereby Sammie overships and the customer will end-up sending that back, and it's an unethical, if not illegal, earnings manipulation practice that happens rarely.

Channel stuffing? Did you even read what I wrote? I mentioned consigned inventory, that BELONGS to Samsung and is still on their balance sheet as their very own inventory, but is reported as 'shipped'. HUGE difference from channel stuffing. Consigned inventory can remain consigned indefinitely really.

 

[czerdrill]

Channel stuffing? Did you even read what I wrote? I mentioned consigned inventory, that BELONGS to Samsung and is still on their balance sheet as their very own inventory, but is reported as 'shipped'. HUGE difference from channel stuffing. Consigned inventory can remain consigned indefinitely really.

This honestly sounds like the far more likely reason for these numbers then Sammie actually selling 20M. Samsung reports these as shipped and there is no risk to the customer's capital unless the product is actually resold.

 

[czerdrill]

Some food for thought:

Impressive Sales Figures for Samsung Galaxy S2

If I'm understanding that correctly, The Galaxy S (which is a line of around 7 phones on different carriers) and S2 (also 7+ phones) combined have sold 30 million globally in the year and a half that either one of them were available (Starting with the S line in June 2010). So again, unless Samsung had this unimaginable explosion in sales, there's no way they sold 20 million in a quarter. The S and S2 are their most successful devices to date, and none of their other devices has anywhere near as impressive sales as those two. So I think its a safe bet, that in this case shipped most definitely does not mean sold.

Also notice they're suddenly reporting sales here :biggrin: