Samsung confirms weak Q3, as device prices tumble

Samsung confirms weak Q3 as device prices tumble

30 OCT 2014

Samsung confirmed its anticipated weak Q3 numbers, as falling selling prices led to a drop in revenue which “put pressure on the cost structure”.

The South Korean handset giant was quick to admit its failings. “Price premiums have eroded due to lower degrees of differentiation among devices in the market and a rapidly changing competitive landscape driven by price competition. Our responses to this rapid shift in competitive landscape were not quick enough to avoid recent weak earnings results,” Robert Yi, SVP for investor relations at the company, commented.

While Samsung actually cited a “slight growth in shipments”, average selling prices dropped due to a “weak smartphone product mix”.

It noted reduced prices for older devices and a decreasing proportion of high-end smartphone sales. The Galaxy Note 4, which became available at the end of the period, had a “marginal impact”.

The South Korean vendor is hoping that the global rollout of Galaxy Note 4 will bolster its average selling prices in the last quarter of the year.

But with the bumper Christmas holiday sales period coming up, competition will intensify, with Samsung noting the potential for growing marketing expenses as a result.

This time around, Samsung provided some guidance on device shipments – sometimes it does, sometimes it doesn’t. Q3 volumes were “about 102 million units”, of which “high 70s-per cent” were smartphones.

Its guidance for the coming quarter is that these will remain consistent, but with the mix improving in favour of more expensive products.

Looking further forward, Yi said that the company “will expand the new product development strategy of focusing on streamlined, strategic models for each price category, to increase product and cost competitiveness”.

With regard to tablets, “under strong seasonality”, shipments increased led by availability of the new Tab S. Combined tablet volume was “about ten million”.

Hyunjoon Kim, SVP in the Mobile Communications unit, said there is an intention to “slim line the [tablet] product portfolio”.

For its networks business, it said that sales “slightly improved” driven by increased LTE investments by local and global carriers.

Operating profit in its IT and Mobile Communications unit, of which mobile makes up the lion’s share, fell by 73.9 per cent to KRW1.75 trillion ($1.66 billion), on revenue which decreased 32.8 per cent to KRW24.85 trillion.

Mobile makes up 96 per cent of the IM sales.

On a group level, the company reported a profit which almost halved to stand at KRW4.22 trillion (from KRW8.24 trillion), on revenue which fell 19.7 per cent to KRW47.45 trillion.

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Steve Costello

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