Samsung Electronics flags 4.2 percent profit drop in Q2

Samsung Electronics is predicting operating profit of around 6.9 trillion won for the April to June period, down 4.2 percent from a year earlier.
Written by Chris Duckett, Contributor

Samsung Electronics has flagged a second-quarter drop in operating profit that missed analyst estimates after sales of its newest smartphone failed to meet expectations.

In an earnings estimate, the giant South Korean smartphone and memory chip maker predicted operating profit of around 6.9 trillion won for the April to June period, down 4.2 percent from a year earlier.

Tuesday's estimate, which comes ahead of audited results to be released later in the month, did not provide a net income figure. It also gave no breakdown of divisional earnings.

The company's profits have sagged since late 2013, due to heightened competition in an increasingly saturated smartphone market that it had dominated for years.

Samsung has faced a double challenge from US arch-rival Apple in the high-end smartphone market, and rising Chinese firms like Xiaomi in the mid and low-end market.

Hopes of a turnaround had largely been pinned on the sixth edition of its flagship high-end smartphone, launched in April.

The Galaxy S6 and S6 Edge with a wraparound screen received rave reviews, but sales fell short of expectations, partly due to production constraints.

Overall sales were around 48 trillion won in the second quarter, Samsung said on Tuesday, compared with the 53 trillion won average of 37 estimates.

Over the weekend, it was reported that the Shanghai Consumer Rights Protection Commission has announced that it is taking legal action against Samsung and Oppo for pre-installing unwanted apps on smartphones, many of which cannot be uninstalled. The commission said smartphone buyers were not informed that the apps existed, which infringed on consumers' right to know.

Last week, Samsung was caught silently preventing Windows Update from automatically running in the background, in favour of its own update program on certain PCs.

The company said it would end the practice within a few days.

For the full 2014 fiscal year, Samsung's yearly profit was down by almost one third, led by an over 40 percent decline in profit from its mobile division.

Full-year 2014 operating profit for Samsung Electronics was down by 11.8 trillion won to 25 trillion won, on a 10 percent reduction in sales over the year to 206 trillion won.

In April, the fall of the mobile division continued, with Samsung's semiconductor business now the profit driver of the group. For the first quarter, the semiconductor and display panel business grew profit by 81 percent to 3.39 trillion won, whereas the mobile group contributed 2.74 trillion won in profit, a significant drop from the 6.43 trillion won gained in Q1 2014.

With AAP

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