Samsung quarterly profits drop for first time in two years

By Sooraj Shah
24 Jan 2014 View Comments
Apple iPhone 5S vs Samsung galaxy S4 three quarter

South Korean mobile phone and TV maker Samsung reported its first quarterly operating profit decline in two years, as sales of its smartphone devices staggered.

The company, which is rumoured to be releasing the Galaxy S5 smartphone before this year's Mobile World Congress (MWC), made a net profit of 7.4tn won (£4bn) in the quarter ending December, an 11 per cent drop from the previous quarter.

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This was partly down to a 800bn won (£448m) special employee bonus to commemorate 20 years since Chairman Lee Kun-hee announced a management strategy that the firm regards as a key reason for its recent growth.

It also suggested that a stronger domestic currency knocked off about 700bn won.

The company's smartphone sales also took a dip of 2.8 per cent quarter on quarter, possibly as a consequence of the launch of Apple's iPhone 5S and 5C devices, and consumers' reluctance to buy the S4 with the S5 looming on the horizon. Operating profit stood level at the mobile division at 5.47tn won.

The firm's display unit had a significant drop in operating profit, plummeting by 90 per cent to 110bn won, partly because sales of the Galaxy S4 were weaker than forecast.

Samsung said it would be "challenging" to improve upon its earnings in the current quarter as a lack of demand after Christmas "will put pressure on demand for components and TV products".

In its earnings release, the firm said that it expects competitor prices and products to "intensify amid accelerated replacement from feature phones to smartphones".

This could have an impact on the firm's smartphone strategy going forwards, as it may have to slash prices to compete with new rivals in the mobile manufacturing space.

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