Samsung fails forecast as smartphone sales lag
Samsung Electronics Co, the world's largest technology firm by revenue, has fuelled concerns about flagging demand for high-end smartphones with a weaker-than-expected earnings forecast for the second quarter.
The South Korean giant forecast of 9.5 trillion won ($9.12 billion) in operating profit for the April-June quarter would be a record.
But analysts had expected a figure of more than 10 trillion won, and shares in the firm lost more than 3 per cent in afternoon trade.
"It's weaker than expected. Slow mobile sales, combined with hefty marketing costs for the flagship Galaxy S4 smartphones, undermined the bottom line," Jeff Kim, of Hyundai Securities, said.
And Daiwa Securities analyst Jae H. Lee said the firm would likely be hit further by higher advertising costs in the second half as it tries to keep sales volumes up.
Samsung has lost nearly $US30 billion in market value since mid-March, before it launched the Galaxy S4 smartphone a month later.
Investors are concerned that the company relies too heavily on IT and mobile business, which accounts for more than 70 per cent of its operating profit, at a time when the global outlook for this sector is not so bright, Mr Kim said.
Several brokerages have downgraded Samsung and their earnings forecasts for the company on fears that the S4 is not selling as strongly as hoped. Kim Young-chan, an analyst at Shinhan Financial Investment, said Samsung's other business lines - semiconductor and display units - were projected to have produced good results. Samsung, the world's top maker of smartphones, memory chips and flat-panel TVs, was giving earnings guidance before official results at the end of July.
The estimate for second-quarter operating profit represents a 47 per cent increase from the actual figure of 6.46 trillion won a year earlier.
The forecast marks an 8.2 per cent rise from the previous quarter, when the tech behemoth posted an operating profit of 8.78 trillion on the back of robust smartphone sales.
The company did not provide a net profit estimate or breakdown figures for its individual business units. Sales in the April-June period were expected to reach 57 trillion won, up 19.8 per cent from the same period last year.
A poll of seven analysts forecast an average second-quarter operating profit of 10.1 trillion won on sales of 58.6 trillion won, Dow Jones Newswires said.
In afternoon trade on Seoul's KOSPI stock index, Samsung was down 3.49 per cent at 1.27 million won.
The new market jitters about Samsung come after Canada's troubled BlackBerry, fresh after launching two flagship phones, on Friday posted an unexpected first-quarter loss and disappointing sales figures.
Its share price tumbled nearly 28 per cent on the news.
Frequently Asked Questions about this Article…
Samsung forecasted 9.5 trillion won (about US$9.12 billion) in operating profit for the April–June quarter. While that would be a record for the company, analysts had expected more than 10 trillion won, and a Dow Jones poll of seven analysts averaged 10.1 trillion won on sales of 58.6 trillion won.
Shares fell because the 9.5 trillion won forecast was weaker than analysts' expectations, and investors were concerned about slower-than-expected mobile sales and higher marketing costs for the flagship Galaxy S4. The stock lost more than 3% in afternoon trade and was down about 3.49% at 1.27 million won on the KOSPI index.
Yes. The article highlights reduced demand for high-end smartphones and slow mobile sales as key reasons the guidance disappointed investors. Analysts warned that heavy marketing costs for the Galaxy S4 and potentially higher advertising in the second half could further pressure profits.
According to one analyst quoted in the article, Samsung's IT and mobile business accounts for more than 70% of its operating profit, which worries investors when the global outlook for that sector softens.
Yes. The 9.5 trillion won estimate represents a 47% increase from the 6.46 trillion won operating profit a year earlier and an 8.2% rise from the previous quarter's 8.78 trillion won.
Analysts cited Samsung's semiconductor and display units as likely producing good results, even as concerns mounted about smartphone sales and marketing costs.
The article says Samsung lost nearly US$30 billion in market value since mid‑March, before launching the Galaxy S4 about a month later.
Investors should watch Samsung's official results at the end of July for breakdowns by business unit, any updates on Galaxy S4 sales and marketing spend, and analyst revisions or brokerage ratings—several brokerages had already downgraded Samsung and cut earnings forecasts following the guidance.
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