Samsung Q3 profits to plummet: Korean analysts

Multiple Korean securities firms published reports on Tuesday expecting a hefty profit drop from Samsung's IT and mobile division for the period.

They cited lowered average sales price (ASP) from heated competition, absence of flagship phones during the quarter, and consumers waiting for Apple's iPhone 6 as some of the causes. Some have expected profits to drop near 40 percent from the previous year.

"Due to decreases in ASP and margin rates, profits from IT and mobile division will be lower than previous expectations, while emptying inventories of AMOLED [active-matrix organic light-emitting diode] for smartphones will cause its display division to post losses," said Song Myung-sup, an analyst at HI Investment & Securities.

Smartphone shipments will rise from the previous quarter, but absence of a flagship model during the quarter means more will be spent on marketing, which will eat away profits, the analyst said.

Song lowered the operating profit estimate to 6.1 trillion won ($5.9 billion) from his previous 7.3 trillion won ($7.1 billion).

Woori Investment & Securities analyst Lee Sae-chul shared the sentiment, and expected the Korean tech giant to post operating profits of 6 trillion won ($5.8 billion).

"Heated competition from Chinese players, such as Xiomi, and the market's high expectations for Apple's new product will continue to weaken [Samsung's] smartphone profits in the second quarter," said Lee in his report.

Samsung Electronics posted operating profits of 10.16 trillion won ($9.97 billion) last year in the third quarter, its highest ever, but new estimates by securities firms means this can drop by as much as 40 percent this year.

As of Monday, according to FnGuide, a local financial information agency, the combined average estimate of Korean security firms for the electronics giant's operating profit for the third quarter was 7.44 trillion won ($7.31 billion), a drop of 26 percent year on year.

Source: ZDNet.co.kr