Disappointing Samsung quarterly earnings, Chief Financial Officer warns

Chief Financial Officer Lee Sang Hoon warned of disappointing Samsung quarterly earnings on Tuesday. Specifically, he stated that the Q2 earnings of the richest smartphone maker in the world will be “not that good”. He did not provide further details.

Mr. Sang Hoon’s comments were first reported by South Korean TV and press, and later confirmed by the company itself. Samsung is expected to report preliminary earnings for Q2 next week.

Fierce competition

Samsung’s sales have weakened since Q3 2013, when a record 10.2 trillion won was reported. Mobile phone sales declined in Q1 2014 to 33.4 trillion won. Fierce competition from low-end Chinese manufacturers and upmarket Apple iPhones have eaten into the giant’s global market share.

Analysts say reduced earnings are being driven mainly by weaker smartphone sales, with local competitors in emerging markets gaining in inexpensive devices.

In order to reduce its dependence on revenue from its telecommunications business, Samsung says it is investing in memory chips and introducing new high-end TVs. Currently, telecom products bring in over 75% of the company’s earnings.

New Televisions

Three new UHD televisions were announced on Tuesday, two of them with curved screens. There is a notable addition to its HU8550 series with a $9,999 price tag and 85-inch screen. The new television is the largest ever in Samsung’s HU8550 range. Sources say the set will be available at the end of June.

The TV sets with curved screens come in 55- ($2,200) and 65-inch ($3,300) sizes. They will be on sale in the US in August.

Samsung new 85 inch TV

The UHD 4K HU8550 Series Smart TV – 85” Class (84.5” Diag.) retails at $9,999. (Photo: Samsung)

CNET writer, David Katzmaier, is in the middle of a one-month experiment living with a curved LED LCD. Two weeks into the trial he says he wants his flat-panel Panasonic plasma back, “but for reasons that have little to do with geometry.”

Katzmaier says he misses the Panasonic’s better picture quality, especially when viewing programs off-angle. He adds that in spite of the new TV’s radical-looking shape, the curve makes no difference to his or his family’s enjoyment of TV games, movies or shows.

In order to remain impartial, he plans to continue living with the Samsung curved set for another month, and see whether anything new within him or his family develops.

Samsung shares down

At the close of trade in Seoul today, Samsung shares were 1.9% down. Samsung stocks have declined by 3.8% since the beginning of this year, compared to a 1.5% slide in the Kospi index (the index performance for Korea’s Stock Exchange).

As producers introduce larger smartphone screens, margins are suffering. The Sony Xperia Z2 and HTC One M8 both come with large-sized screens. Apple’s iPhone 6, its next model that comes in two sizes – rumored to be a 4.7-inch and a 5.5-inch screen – is expected to start production in July in China. Several surveys of iPhone customers reported that Apple’s new smartphone absolutely must have a bigger screen.

Bloomberg quotes an IBC Securities Co. estimate which says that Samsung’s shipments of smartphones dropped to 78 million units in Q2 from 87.5 million units.

The Galaxy S5, which was launched in April 2014, clocked up sales of 10 million units worldwide within 25 days, according to Korea Daily.

About The Samsung Group

The company was founded by Lee Byung-chull in 1938 as a small trading firm called “Samsung Sanghoe”, producing noodles and basic groceries. In the 1960s it entered the electronics industry.

By the 1990s Samsung became the world’s largest producer of memory chips and the second biggest chipmaker, after Intel.

In 2012, it overtook Nokia and became the world’s number 1 phone maker.

Today, the Samson Group consists of about 80 companies. It is involved in consumer electronics, medical services, financial services, shipbuilding, construction, and telecommunications.

Its headquarters are located in Seoul, South Korea. In 2013, the company employed 427,000 workers worldwide.