For the past few years, Samsung has proved itself as the biggest smartphone manufacturer in the world. The South Korean giant managed to get everything right with its mobile division, especially with the widely popular premium galaxy range of smartphones, which naturally translated into record profits and revenues.
However, it looks like the company has finally hit the wall this year as its profits and revenue has been steadily declining. In fact, at the recent regulatory filings, the company states that it expects profits to come at a three year low.
According to the regulatory filing by the company today, it expects operating profit to be at $3.8 billion for the third quarter of 2013. While this figure can be said as quite decent for a smartphone manufacturer, it will be the lowest profit the company would have earned since 2011.
Naturally, analysts never expected such a dip in the profits, so the actual figure is going to be much lower than the estimated one. Thomson Reuters estimated the operating profit to be around 5.6 trillion won in Q3 2014, but the company is clearly showing that its profits will be around 4.1 trillion won. This is a shocking 60% fall in the operating profit for the company.
Samsung relies on its mobile division for generating the majority of profits for its shareholders. In fact, last year, its mobile business contributed to almost 70% of the operating profit which clearly shows how much the company is banking on its smartphone division.
And naturally as the smartphone market is not growing as fast as before, Samsung is facing the heat. Further, the arrivals of Chinese smartphone manufacturers as well as the release of high end good quality smartphones from existing tech giants have made things even harder for the company.
This has increased the overall spending on marketing and advertising worldwide, taking a toll on the profit. Also, recently Samsung had to cut down the margins to make its devices more affordable so that they could compete with other phones from rival companies.
In spite of the big dip in profit, the next quarter could see some growth as the company expects revenue from its newly announced Galaxy Note 4 flagship. Further, a number of new devices in the premium Alpha as well as budget and mid-range series are in the pipeline for launch by the end of the year, which could make things better for the company in the upcoming quarters.
Also, Samsung’s chipset division has seen strong demand recently amidst other slow growing businesses. As a result, the company is now planning a very big investment, around $14.7 billion for its new chip facility in Seoul.
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