Samsung faces first drop in annual operating profit since 2011

Samsung faces first drop in annual operating profit since 2011

08 JAN 2015

Samsung announced today that its Q4 operating profit was expected to drop 37 per cent and that its profit for the full year would fall by nearly a third as it continues to lose market share to low-cost rivals.

The South Korean firm said its Q4 operating profit would be about KRW5.2 trillion ($4.74 billion), leading to a full-year profit of KRW25 trillion — its lowest in since 2011, Reuters said. Its operating profit in 2013 was KRW36.8 trillion.

The market leader saw its share in Q3 fall to 24.4 per cent from 32 per cent in Q3 2013. Its smartphone sales dropped to 73.2 million units from 80.4 million a year earlier. In China, Samsung’s biggest market, smartphone sales fell 28.6 per cent.

It was the third consecutive quarter it has lost market share, and analysts don’t expect any improvement in Q4 as it faces increased competition from low-cost Chinese makers like Huawei and Xiaomi (ranked third and fourth) as well as Apple’s new iPhone 6.

Huawei, Xiaomi and Lenovo saw their combined market share increase by 4.1 percentage points while Apple’s share edged up slightly from 12.1 per cent to 12.7 per cent. Apple’s sales in the quarter increase by eight million units to 38.2 million.

Samsung’s Q3 profit dropped almost 50 per cent to KRW4.22 trillion as revenue fell 20 per cent to KRW47.45 trillion. The operating profit in its IT and Mobile Communications unit, of which mobile makes up the lion’s share, fell by 74 per cent to KRW1.75 trillion, on revenue that dropped 32.8 per cent to KRW24.85 trillion.

The company is making a big bet on the nascent Internet of Things (IoT) sector, which it sees as the industry’s next big revenue opportunity. Boo-Keun Yoon, president and CEO of Samsung, said this week at CES in Las Vegas that 90 per cent of all its products will be IoT devices by 2017.

Yoon said Samsung will invest more than $100 million in the developer community this year to support growth of new applications in the IoT space.

Samsung made a strong move into the growing connected-home space in August with the $200 million purchase of SmartThings – a US-based developer of a home automation platform.

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Joseph Waring

Joseph Waring joins Mobile World Live as the Asia editor for its new Asia channel. Before joining the GSMA, Joseph was group editor for Telecom Asia for more than ten years. In addition to writing features, news and blogs, he...

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