Samsung Electronics Co. Ltd (KRX:005935) (LON:BC94) is expected to report a profit decline for the three-month period that ended June due to the weak performance of its smartphone business, according to an analyst on Monday.
The South Korean electronics manufacturer is confronting a third consecutive quarter of profit decline as Apple Inc. (NYSE:AAPL) is preparing to roll out its iPhone 6 and lower-end models are taking a bigger share in the slowing smartphone market.
Lee Min-hee, an analyst at IM Securities and Investment opined, “The worsening performance is mainly due to decreasing consumer loyalty to Samsung’s smartphones, such as the Galaxy S5, which lack features that differentiate the Samsung products from budget Chinese smartphones.”
Min-hee noted that Samsung Electronics Co. Ltd (KRX:005935) (LON:BC94) posted more than 10 trillion won for the first time in the third quarter last year, but it declined to 8.3 trillion won in the fourth quarter. During the first quarter this year, the company reported a profit of 8.4 trillion won.
Analysts estimated for Samsung Electronics Co. Ltd (KRX:005935) (LON:BC94) to report an operating profit of less than 8 trillion won for its June quarter. IM Securities and Investment predicted that the South Korean electronics manufacturer’s profit would be around 7.5 trillion won.
Chang Sea-Jin, a business professor at Korea Advanced Institute of Science and Technology commented, “Samsung’s heyday has gone. Its profit growth was abnormally high for the past three to four years, and now that is normalizing.”
Analysts observed that the Galaxy S5, the latest flagship smartphone of Samsung Electronics Co. Ltd (KRX:005935) (LON:BC94) is selling well, but its performance is not robust enough to offset the weak sales performance of its mid and low-tier devices. The South Korean electronics manufacturer is expected to launch the Galaxy Note 4 by the end of this year, but analysts believe that the device is not a game changer. This means that the company does not have a growth driver going forward.
Chang said, “Samsung’s heir apparent has no magic wand. It’s not something he can tackle in one or two years.”
Data compiled by Thomson Reuters I/B/E/S show that Samsung Electronics Co. Ltd (KRX:005935) (LON:BC94) is expected to report an earnings decline of 12.6%. The company is expected to report 8.3 trillion won for the June quarter based on the average estimate of 38 analysts surveyed by the financial research firm.