Samsung expects to suffer annual profit drop

As Samsung's smartphone business continues to struggle due to increased competition and a reduction in prices, the company has predicted that its annual profits for 2014 will tumble.
Written by Aimee Chanthadavong, Contributor

Samsung Electronics has predicted that it will suffer a drop in annual profits for 2014 as its smartphone business continues to suffer.

The company said in its preliminary earnings guidance for the fourth quarter of the 2014 financial year that consolidated operating profit will be approximately 5.2 trillion won ($4.7 billion), while consolidated sales will be 52 trillion won.

Analysts have told AP that as Samsung's smartphone business continues to struggle, so too will the rest of the business, as smartphones make up two thirds of the company's profits. This is despite the fact that Samsung's semiconductor division continues to see improvements, and helped the company rebound from the third quarter.

"It's time to see Samsung as a semiconductor company," said Lee Sei-cheol, an analyst at Woori Investment and Securities.

The forecast drop follows a pattern of similar reports that the Korean smartphone manufacturing giant has been making in the last year.

Last October, Samsung's net profit for the third quarter of 2014 plunged 49 percent compared to the same period in 2013. Similarly, in the second quarter of 2014, the Korean giant announced an overall 15 percent fall in operating profit, to 7.19 trillion won.

During both instances, the Korean giant indicated that its smartphone revenue was being hit hard due to increased competition and reduced prices for older phones.

However, during a press conference for Samsung's Galaxy Note 4 World Tour, DJ Lee, head of Samsung's mobile division, said at the time that although Samsung is having a tough time, it would only be a temporary crisis.

"We expect we can overcome this crisis by our own fundamental technology," said Lee. "We have a full line-up of smartphones, from low cost to premium. We'll react actively based on product category and market situation of every country."

Earlier this week at the Consumer Electronics Show (CES) 2015, BK Yoon, Samsung president of consumer electronics, outlined that the focus for the company will be to "unlock the value" of the Internet of Things (IoT). Yoon promised that by 2017, all Samsung products, including televisions and mobile devices, will be "IoT devices".

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