Samsung mobile profit down by a third in 2Q 2014

Samsung mobile profit down by a third in 2Q 2014

Summary: A decline in profitability of Samsung's IT and mobile communications division has pulled overall profit for the Korean conglomerate lower.

SHARE:
TOPICS: Mobility, Samsung, Korea
15

Samsung has announced an overall 15 percent fall in operating profit to 7.19 trillion won (US$6.97 billion) in its official earnings report for the second quarter of this year.

Leading the fall in operating profit was the company's mobile and IT arm, which saw its profit fall by 31 percent quarter-on-quarter to 4.42 trillion won from a first quarter operating profit of 6.43 trillion won. At the same time last year, the mobile division posted an operating profit of 6.28 trillion won. The mobile and IT arm of the company consistently produces the largest revenue and profit for the Korean giant.

The other divisions within Samsung saw operating profit increase, with operating profit from consumer electronics growing 300 percent to 0.77 trillion won, and semiconductor and display panel business saw operating profit rise 12 percent to 2.09 trillion won.

Overall, Samsung received 52.35 trillion won in sales, down 2 percent, which continued the slide in recent sales numbers, and collected 6.25 trillion won in net profit — numbers that were in line with guidance released by the company earlier in the month.

The company said an appreciation of the Korean currency saw 0.5 trillion won wiped from its profit, as well as needing to increase marketing spend to reduce handset inventory across its sales channels.

In the second quarter, Samsung sold 95 million handsets and 8 million tablets. Of the handsets sold, the percentage of smartphones sold was in the "high 70 percent" range, and the company expects the ratio to hit 80 percent in the next quarter as seasonal demand picks up.

Hyunjoon Kim, senior vice president of Samsung mobile said the company was planning a new model and new material usage in the high-end smartphone area, but would not provide further details.

The company also said that its enterprise SSD business expects to see increased sales thanks SSD usage by cloud computing vendors.

In response to the downturn in profit, all senior executives within the handset business, including company co-CEO JK Shin, have returned a quarter of the bonuses they received on July 8.

Topics: Mobility, Samsung, Korea

About

Chris started his journalistic adventure in 2006 as the Editor of Builder AU after originally joining CBS as a programmer. After a Canadian sojourn, he returned in 2011 as the Editor of TechRepublic Australia, and is now the Australian Editor of ZDNet.

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

15 comments
Log in or register to join the discussion
  • Re: Samsung mobile profit down by a third in 2Q 2014....

    The market is levelling out which was inevitably going to occur sooner or later. There are that many quality mobile devices out there both Smartphones and Tablets that eventually the consumer reaches a point where they don't feel the need to upgrade to the latest and greatest as they are quite happy with what they have.
    Its taken a while to show up but its not just Samsung but Apple as well being the two major players have experienced a fall off of profit. This trend does not bode well for the Windows Phone as Microsoft is attempting to push it in to an already flooded market. Even with the Surface Pro 3 the jury is still open despite all the hype that surrounds it.
    I have an iPhone 5 which I own and is not tied in to a monthly contract and see no reason to upgrade to a 5s or 6 come to that. Similarly I am not upgrading my First Generation iPad Mini. I am certain there are many cases such as this with Apple and Samsung Products up and down the land. For example you still see an enormous number of iPhone 4S's out and about. Older generation I know but if its doing the job there is no reason to upgrade.

    With quality products from Apple, Samsung and the likes of HTC already out there no wonder the market is slowing down.
    5735guy
  • It is just Samsung and Sony and HTC...

    But not Apple. Apple saw an increase YoY in bothe revenue and profit with the iPhone.

    This is more a result of the budget Chinese phones impacting Samsung's market and not Apple's as predicted.
    Bruizer
  • The Android bubble is bursting

    "Do you hear that Mr. Anderson? That is the sound of inevitability." (From The Matrix.)

    This is what happens when you build on or participate in an ecosystem, built on cheapness, or no value: it eventually collapses. As for all those idiots who said Nokia should build Android smartphones: take note.
    P. Douglas
    • Not a good quote to go by!

      Mr Anderson kicked butt!
      martin_js
      • Yeah, I know ...

        ... but I still like the quote.
        P. Douglas
    • You're wrong

      Nokia losses in the last quarter were close to $1 billion - considering that the reported losses were just for a little bit more than 2 months. Windows phone sales are based on cheap devices.

      Globally I think android makers are better, LG is better, HTC was profitable again, xiaomi almost double its sales, Lenovo growth was huge, ...
      The problem was Samsung, in my opinion they got reckless, competition is doing a better job. If Samsung has a problem, in my opinion, for consumers and other makers a more evenly distributed share and a smaller Samsung is welcomed.
      For those who defend the Nokia going windows (at this point I have a hard time understanding those - I confess) instead of android, it seems before Samsung was unbeatable, now that Samsung is being fought, another excuse is needed.

      Smartphone growth is slowing down, it was easy to increase sales almost without effort - those days are over.
      AleMartin
      • Supporting my claims

        https://bgr.com/2014/07/31/android-vs-ios-vs-windows-phone-vs-blackberry/

        Windows Phone as it is now is a mistake - period.
        AleMartin
        • Windows Phone, as it is now, is much better than Android and iOS,

          and higher sales numbers don't prove that iOS or Android are better than WP.

          iOS and Android had a few years head-start on WP, and of course, they sold in big numbers, and people retained their brand loyalty. But, brand loyalty is not how the future is determined, and, just like Palm and RIM went south, so could iOS and/or Android. Nothing in the current marketplace is guaranteed to be there 5 years from now.

          Persistence and a better product, can oftentimes overcome the lackluster brands, and iOS and iPhones and tablets, are lackluster, and the Android devices and the OS aren't that much better than what Apple sells.

          Linking to other web pages to support your claims, is no proof whatsoever. It's only a reflection of the current status of the market, and not a representation of what the future holds.
          adornoe@...
          • I said nothing about one being other than the other

            Obviously going Windows was a mistake - Nokia smartphones was sold not because of the great results they were having, it was sold because it was going bankrupt and unable to make profits for several quarter in a row.

            HTC is about to release the same phone with android and WP, let's see how sales will compare - I say android will outsold the WP version at least 4:1.


            The future of Nokia in smartphones is no more. The future of what remains of it in the hands of Microsoft is not yet known, but so far the future is not bright - heavy layoffs coming and a share that is decreasing. There are 8 android OEMs that are ahead of Nokia WP! It's more or less obvious that MS wants to do like many others - develop the platform and design the products and outsource manufacturing (and it's the right thing to do IMO).


            iOS and android had no head start, Microsoft makes smartphone OSes for a longer time. It's like saying Linux has a head start compared with Windows 8.... yes if you forget about 7, XP, vista, 2000, ....

            Being persistent never worked that great for Microsoft, there is this myth that at 3th try MS makes it good, but there are enough examples of the opposite.... maybe they will make it with WP, maybe not... so far they are failing and not getting any better, and I'm sure by your standards they should be doing a lot better by now - but again I'm usually right, you are not :P (Do you want me to find previous quotes from you :) ?)

            I'm not trying to proof WP will fail, I'm giving my opinion and giving some support to it, nobody knows the future. But as it is now, WP will keep on failing (in my opinion). I've seen many different opinions since the release of WP7 (and before), so far I was mostly very accurate (as usually). You are free to say WP will go past android in ... 3 years - your opinion, I will respect it.
            AleMartin
          • fix

            being better*
            AleMartin
          • So let's look at some of your pevious predictions :)

            This is going to be fun:

            "... WP market-share lately, since, it's growing, every day, and could overtake the iPhone share in the U.S. in a year or two,...

            It pays to stay informed, otherwise, you risk making a fool of yourself. Oh, wait! You already did!
            adornoe
            20 November, 2013 21:50
            "

            WP overtaking iOS in the US - Who's the fool?

            "
            My predictions are coming true, with Windows Phone overtaking iPhones,
            first in Europe, and eventually in the U.S.

            It will take less than a year for WP/Nokia to become the number 2 in ALL of Europe, ...
            adornoe
            6 November, 2013 02:35
            "

            Define "less than a year" please. And the "ALL" it's like you have post it - in caps.

            "
            The Android tablets sales can easily be overcome within a year or two by Microsoft...
            adornoe
            18 May, 2013 01:25
            "

            More than one year has passed, do you still believe surface 3 (and "all") will be outselling android tablets in another year?

            "
            When Nokia is selling close to 6 million devices in a quarter,
            ... perhaps bringing sales to some 8 or 9 million devices quarterly, then, it becomes a hugely disruptive force in the smartphone arena...
            adornoe
            18 April, 2013 21:50
            "

            They have reached 8.8M sales in a previous quarter, where's the disruption?

            "
            Android will be gone in about 3 years, ...
            adornoe
            24 October, 2012 00:00
            "

            So android will have little more than 1 year by now :)

            ...
            AleMartin
          • Pretty silly there, AleMartin: the predictions may or may not come true,

            but, when it comes to Android vs WP, there is no doubt that WP is much better, and with persistence and good marketing, the best will come out on top, eventually.

            So what if the predictions don't occur exactly on time; if they do come true, the predictions would have been correct.

            However, predictions are not what shilling is about, and you are a shill to the max. And you're as anti-MS as anyone can be. Predictions and other arguments won't change what you are, and your arguments will remain as fallacious as ever.

            BTW, the predictions I made are just about a year old, and they were for 2 to 3 years out, and we're not there yet.

            With Samsung looking for a different OS to operate their devices, it's quite possible that my predictions will come true, sooner or later.

            Now, go get a life. Shilling and challenging people is not a good one.
            adornoe@...
          • Your predictions not mine - I haven't changed a word or a date.

            Nothing against you failing so many times. I just enjoy challenging you because of your rudeness, lack of modesty and because I enjoy it.

            The conclusion is that:
            My predictions - pretty accurate.
            Your predictions - wrong a lot of times, sometimes even insane. When Microsoft do something right you are right (because there is a clear pattern on your posts ;) ).

            By the way I like this sentence of yours; "... if they do come true, the predictions would have been correct..." - Wow your reasoning embarrasses Sherlock H.

            And I like to challenge you, don't tell me what to do - it's pointless - that's also a pretty pathetic behavior, more when I'm being always polite with you.
            If you believe my posts don't comply with the forum rules complain to ZDNet.
            AleMartin
      • There is nothing to suggest nokia android would have been a success

        Your examples revolve around two Chinese companies selling well in china and HTC having a cycle of one quarter of profit followed by three quarters of heavier losses.

        Even Samsung is struggling. Nokia missed the boat on Android and would be just another also-ran struggling to find some way to make android profitable like almost every other android maker.

        Nokia is now on track to be profitable in 2016 on selling windows phones alone.

        Odds are that Nokia would have went belly up with android as Microsoft was giving Nokia quite a lifeline of cash.
        Emacho
        • And do you think Nokia will be able to be enough competition

          ... for those Chinese OEMs?
          Good luck with that.
          The big growth in China will be a challenge for any non-chinese OEM. Mind that Samsung, LG, Motorola (at least so far) and Sony are not Chinese and are ahead of Nokia now when before WP, Nokia was several times in front.

          China as a manufacturer power house, is starting to feel the pressure of higher wages, being on the watch and look for an opportunity can be a smart decision, even if OEMs have to take some "pain" for now - and this is just a hunch, I really don't know if China will be challenged any time soon.

          The best time for smartphones and tablet hardware makers is already behind, the market will go the way of traditional PCs - very low margins, the biggest difference being that sales will be 4 to 6 times bigger (in value maybe 2 to 3 times).
          AleMartin