Apple dealt Samsung its lowest quarterly profit since 2011

One of the top mobile phone makers in the world and considered to be the biggest producer of smartphones, Samsung Electronics Co. is out in the colds right now no thanks to the lackadaisical performance of its newly-launched flagship phones and intense competition from its chief rival Apple Inc. and emerging Indian and Chinese mobile companies.

In a foretaste of its expected quarterly earnings which will be revealed this month, the electronics magnate stated its projected quarterly operating income has nosedived to its lowest for the last three years, which is affected by anemic sales of its flagship Galaxy phones.

Samsung became a household brand in the smartphone segment with its assortment of Galaxy flavors in the past few years. But Apple reduced the once dominant Galaxy smartphones to pulp with its highly anticipated and widely popular iPhone 6 and iPhone 6 Plus models.

Apple’s strategy of creating smartphones with larger screens upended the Galaxy mobile devices and makes it more enticing to millions of American users who have favored the bigger Galaxy phones then.

Samsung woes never stop as it also submitted weak sales in other battlefields. In emerging yet lucrative markets such as India and China, the Chinese and Indian brands are outperforming the Samsung’s offerings.

Analysts have constantly projected the poor Samsung’s profit this year as Galaxy sales didn’t lived up to the user’s expectations and added that their third quarter earnings could turn out to be one of the worst profits in the company’s history.

According to financial data provider, FactSet last Tuesday, Samsung stated that the median forecast of July-September operating income will hit $3.8 billion, which lags behind the median set by the analyst’s forecasts. This will translate to a sharp and nasty 60% drop compared to the same period last year.

Samsung quoted, ‘‘The operating margin declined due to increased marketing expenditure and lowered average selling price,’’ and added ‘‘Cautiously expects increased shipments of new smartphones and strong seasonal demand for TV products.’’

So also, Samsung’s projected sales in the third quarter of this year limped to 20% drop to $44.2 billion compared to the same period last year, which is to some extent lower than the experts’ expectations.

An analyst at IBK Securities Co. Lee Seung-woo stated, to cope up with the very stiff competition the company should whip up new handset designs. Lee Seung-woo also said  ‘‘Rather than seeking stability, Samsung should seek to distinguish (its phones) with Galaxy’s design policies… The iPhone 6 will be a significant threat to Samsung.’’

The company has shifted the unveiling of the Galaxy Note 4, a large smartphone which is clad with stylus, from September to October after Apple launched its vaunted iPhone 6 Plus.

The company also kicked of the sale of its Galaxy Note 4 in China a month ago, to have few weeks lead over its main rival Apple in one of the world’s most lucrative market for smartphones.

But not all is not well for Samsung as its Galaxy Note Edge smartphone received warm welcome when it was launched. However, the Note Edge which sports a curved side screen and beefed up with news, weather, apps and among other features will have a limited supply.

Samsung is also making its presence felt further in the semiconductor industry a testament of this is the company’s announcement of its $14.7 billion investment plan to put together a semiconductor fabrication plant in Pyeongtaek, South Korea. The erection of the plant will start before summer and its operations will begin in the middle of 2017.

Samsung hasn’t reveal its net income or divisional earnings on its quarterly earnings preview.


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