Samsung shares suffer rocky start to 2014 as profit growth expected to slow

Samsung shares suffer rocky start to 2014 as profit growth expected to slow

Summary: The South Korean company's stock dropped by almost 5 percent, wiping $8 billion off its market cap. It may be small change for Samsung, but fears for profit growth remain.

TOPICS: Samsung
(Image: CNET)

Samsung Electronics saw billions of dollars wiped off its market cap in the first hours of 2014 trading after investors bucked on concerns that the company's profit growth could slow in the new year.

First reported by The Wall Street Journal, shares in the South Korean electronics division opened 1.8 percent lower Thursday, and continued to decline by close to 5 percent, wiping $8.8 billion off the company's market valuation.

It's small change to Samsung, which has a market cap of about $162 billion. But it would have been enough to send alarm bells ringing in the company's C-suite nonetheless.

Mobile remains important to Samsung. Although the company makes chips and other circuitry for other mobile firms — including its rivals, notably Apple — its smartphone unit remains the electronic division's bread and butter.

It's no surprise that all eyes are on mobile for the first quarter, which investors are worried that Samsung may not be able to keep its profit growth momentum ticking over. Sales could further decline in growth as competition comes to a head with cheaper devices slicing away Samsung's electronic division's overall bottom line.

Motorola, for instance, is squeezing the mobile market with its $179 priced Moto G, and its more powerful sibling the Moto X is now $399. Those that have previously bumbled through the mobile world — like Motorola — which recently saw a significant injection from its Google acquisition, are ramping up their efforts to compete.

Samsung's operating profit for the last three months ending December — the often lucrative holiday season — grew by 9.2 percent a year earlier, according to various analysts. That figure is down about 26 percent on the third-quarter.

The company is expected to report its forth-quarter estimates on Tuesday.

Topic: Samsung

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  • Pricing

    "Motorola, for instance, is squeezing the mobile market with its $179 priced Moto G, and its more powerful sibling the Moto X is now $399. "

    I'm hoping that affordable, no-contract phones are the next big thing. I mean, it's insane that a Samsung Galaxy Note 3 runs $650 or more when the Nexus 7 goes for $230.00. I know that miniaturization has its costs, but I'm not seeing any real justification for this price differential... other than the fact that Samsung can get away with it because of "carrier subsidies" that really amount to little more than a payment plan.
  • Mobile is mostly an Apple/Samsung Duopoly.

    Kids want an iDevuce or a Galaxy device. They don't know iOS or Android. Given most kids teach their parents on tech, most adults understand Galaxy and iPhone.

    Amazon gets a bit of live with adults understanding the word "Kindle".

    Google, Sony, LG, HTC, ZTE, MS... All need to do some serious soul searching if they want to stay in the handset business.
  • Samsung Problems??

    I guess the smart phone market is just about maxing out. I would imagine that just about everyone is going to have lower sales in the near future. The Phone services are actually driving the market promising you that you can get a new phone every 6 to 12 months. You pay for it over a time frame, but a lot of people don't weigh that factor, and all they can think of new and greater. As long as they don't buy Obamacare, they may continue to have the money available.
    • Obamacare on an article about phones and Samsung? Seriously you people are

      in serious need of therapy…

      Pagan jim
      James Quinn
  • Stock?

    Ok, the company is allowing places to offer their flagship smartphone (Galaxy S4) for one cent, with a two year contract, while their chief competitor, Apple sells the 5S at $199. So what kind of message does that give potential stock investors?
    • No message

      As long as carrier subsidizes phones 1c or $100 price does not give much info to stock investors. Quarterly reports, P/E and other boring metrics are more important.
      • Today's stock value is based on nothing but hype

        Just take a look at today's stocks, while Samsung and Apple are 10 times more profitable, it is Google (the company that is losing money on EVERYTHING but ad revenue) that is at a ridiculous value. And that is because of nothing but pure hype, not reality.
        • their ad revenue is huge though.

          Also, Google get into new things for the long haul.

          Google glass, self driving cars, android, chromeOS.. All are long. Term future plans, and all are doing well. Google saw the writing on the wall for the future of mobile and successfully took ownership of it by having the dominant mobile OS in the world.

          They saw the future with web services and the cloud taking over and built Chromebooks which are selling everywhere and doing very well.

          Say what you will about Google, but their ability to predict future trends is much better than the likes of Microsoft, a company which has been playing catchup since 07 now.

          Even social which Google didn't dominate wasn't for the lack of trying... Buzz was a bad implantation at the the time, but it is proof that Google had seen the light and wanted in back when MySpace were still the biggest player.
          • You are right only Ad is bringing revenu

            ....but all the things you mention are not. Google glass is still in the beta, not making any revenue but taking large chunks of it with the development. While people are excited about it there is no way to make revenue front it. Self driving cars is also in the development state taking also large amount of revenue. I don't care for driverless car, I love to drive my car and many people too. Why have a Ferrari, Porsche, Corvettes, BMW, and many other excitable cars if they will all be the same, soul less cars. Might as well take the bus. There will be people that will love a self driving cars but who will be able to afford it and who will be liable when something goes wrong? Android is free to phone makers, so there is no revenue there either. Chrome OS is also free, no revenue here either.

            The only revenue comes from ads and we all know this is not forever. If not for the ads, ALL Google investment are a losing preposition. Like wackoae mention, all is hype and that could also be fleeting.