Customers hang-up on Samsung

By on January 27, 2014

One of the leaders in smartphone technology has suffered a drop in phone sales and reported their first quarterly profits fall in two years.

Consumer-electronics giant, Samsung, experienced its first quarterly profit decline in two years as smartphone sales fell and earnings were hit by a one-off bonus payment and currency swings.

Operating profit fell 18 percent to R85.4 million in the three months to December (as compared to the previous quarter) and was down six percent year-on-year, in line with the company’s surprise profit warning issued two weeks ago.

Samsung doled out a huge golden “Thank you” to its employees during the quarter, paying them R8.23 billion to commemorate 20 years since chairman Lee Kun Hee went on a 1993 world tour to find out how Samsung was doing worldwide and wasn’t best pleased with what he saw.

Lee gave a three-day speech to executives in a Frankfurt hotel (with breaks to sleep), exhorting them to “change everything but your wife and children,” and sparking the company’s ascent to electronics big-daddy. The speech, known as the Frankfurt Declaration, was turned into a 200 page book for employees, with a cartoon version for the illiterate – stirring stuff. But, then again, Lee did also burn 150 000 faulty phones on a bonfire and bulldozed the ashes in front of 2 000 staff in 1995.

Profits took a R7.2 billion knock from the stronger Korean currency. In addition, Samsung warned the first quarter of 2014 won’t be particularly great either, saying it would be “challenging” to raise earnings given “the weak seasonality of the information technology industry.”

Arch-rival Apple has also not had a great time recently, reporting a fall in annual profits back in October. However, bumper iPhone sales (including the newly-launched 5S and 5C), look to have stolen a march on Samsung. Mobile sales were down nine percent compared to the previous quarter, pushing operating profit down 18 percent from a record R68.9 billion (although it was unchanged from the previous year).

The company, which has 32 percent of the global smartphone market compared with Apple’s 12 percent, said it expected competition to “intensify” as more people ditch their bricks for smartphones. With Apple having sewn up a deal to sell iPhones to China Mobile’s 760 million customers, as well as Microsoft-owned Nokia and Taiwanese firm HTC launching phones at the end of last year, Samsung’s continued supremacy is far from assured.

Nevertheless, Samsung has an 18.5 percent share of China’s huge mobile market, and Lenovo, Coolpad, ZTE and Huawei are also popular. The iPhone is just one of 20 new 4G phones China Mobile is launching in the first half of this year, according to Citi analysts, with most being sold for far less than the pricey iPhone. Samsung won’t be running away scared just yet…

The world’s largest maker of mobiles and TVs will also take some heart from its full-year results, with sales up 14 percent and operating-profit soaring 37 percent compared to 2012. This year, however, may not be quite so massive.

You must be logged in to post a comment Login

Leave a Reply