Samsung Electronics forecasts 60% fall in quarterly profit

[shortylickens]

Well, all I've ever bought from them was the Note 2 on opening day. That was quite some time ago.

I just switched over to Sony with the Z3 compact. No plans to get with Samsung again soon. Not sure how millions of other users feel about the situation.

 

[Zaap]

Heh. I think people are just currently spoiled by choice. (Which is a good thing). People act like if a company doesn't have Apple-like success, it's some sort of failure. Even though the marketplace would actually *BLOW* if everyone got Apple-like success from every other lackluster thing they put out.

Samsung is just feeling the effects of everyone else having caught up somewhat.

Meanwhile- for my money, there's nothing that even comes close to the Note 4. The day anyone else has a phone that looks as good, has a wacom digitizer & pen, plus all the best features like removable battery, SD card, high res screen, etc then let's talk. Until then, IMO, nothing touches it. That it wasn't a huge departure from the previous Note3 isn't a big deal to me, since that phone was awesome in its own right.

Samsung seems more than willing to try new things that no one else has- the Note series in the first place, and now the Edge. Love it or hate it, no one else even tries nearly as bold designs.

Meanwhile, although it's not the most radical upgrade, people have to be just plain spoiled to pretend the S5 is any kind of terrible device. There's just more choice than there used to be (again, a good thing) so it's simply not the *only* thing anyone has to settle for- you know, like that *vaaaaaaast* choice of new phones running iOS!

I think Samsung just did exceptionally well when there was virtually no one else making Android devices to challenge them consistently in the past few years. Now that the competition has heated up and a few other companies have stepped up, their sales simply reflect the new reality. They're going to have to hustle more like everyone else (except of course Apple) and not rest on their laurels.

I'm glad for that. Companies resting on their laurels and celebrating huge successes for the same ol' same ol' is awesome for their bottom line and great for corporate cheerleaders rooting for one team or another- but it sucks for consumers.

Let Samsung sink or swim based on what they actually come out with and how people react to it- in a marketplace filled with competing products. The way it should be.

 

[GTaudiophile]

As someone looking for a new smartphone, Samsung needs to do a few easy things:

1. Simplify their product line: low, mid, premium. Three products. Worldwide. That's it.
2. Premium needs to be premium but no more expensive than Apple's premium device.
3. Run the latest stock Android and allow OS upgrades.

 

[Mopetar]

I don't quite get it either. If Samsung is failing while making ~$4 billion in profit what are companies like LG (~$160 million profit) or HTC ($12 million profit) considered? Never mind those like Motorola or Sony who are losing money. I can't think of any other Android manufacturer that wouldn't kill to trade places with Samsung.

 

[lopri]

I think the true problem for Samsung is that the competition has actually started making decent phones.

I thought I said the same thing in my previous post you quoted by stating that "choices for consumers are unprecedentedly plentiful." I am more and more attracted to Sony's offerings personally.

 

[Shlong]

When HTC was the top Android manufacturer they made $250 million in profit per quarter and that was a good quarter. Samsung in a bad quarter is making $4 Billion in profit. Their margins have dropped because of smart phones being so commoditized but I don't see them losing money any time soon.

 

[WelshBloke]

Their margins have dropped because of smart phones being so commoditized

This.

Its hitting (or going to hit) everyone.

 

[Dari]

I don't quite get it either. If Samsung is failing while making ~$4 billion in profit what are companies like LG (~$160 million profit) or HTC ($12 million profit) considered? Never mind those like Motorola or Sony who are losing money. I can't think of any other Android manufacturer that wouldn't kill to trade places with Samsung.

When HTC was the top Android manufacturer they made $250 million in profit per quarter and that was a good quarter. Samsung in a bad quarter is making $4 Billion in profit. Their margins have dropped because of smart phones being so commoditized but I don't see them losing money any time soon.

That's because, unlike HTC or LG, Samsung has hundreds of thousands of employees, hundreds of companies, and represents a hefty chunk of South Korea's economy. That $4B profit is spread pretty thin when you have to dump a lot of that money into R&D, pensions, dividends, etc...

Last year their profit was $10B, now it's $4B. When/If it starts turning to losses, it'll have catastrophic consequences throughout the Samsung empire and S. Korea. That is why it's so serious. To have a dominant division is bad enough. But to have a dominant company in a country is even worse. And right now, a lot is riding on Samsung Mobile...

 

[dawheat]

That's because, unlike HTC or LG, Samsung has hundreds of thousands of employees, hundreds of companies, and represents a hefty chunk of South Korea's economy. That $4B profit is spread pretty thin when you have to dump a lot of that money into R&D, pensions, dividends, etc...

Last year their profit was $10B, now it's $4B. When/If it starts turning to losses, it'll have catastrophic consequences throughout the Samsung empire and S. Korea. That is why it's so serious. To have a dominant division is bad enough. But to have a dominant company in a country is even worse. And right now, a lot is riding on Samsung Mobile...

I think Samsung Electronics is at a cross roads, but the doom and gloom is stupid.

Samsung as a whole maybe - of which Electronics is one division - has dozens of divisions. Yes it generates a lot of the profit, but a lot of these 40-odd divisions (Construction, Chemicals, Shipping, etc) I think exist solely to employ people and make some money while at it.

Secondly things like R&D, wages, etc are obviously part of their costs. That's how Samsung Electronics' 44 billion in sales turns into something like 4 billion in profit for the quarter.

And Samsung Electronics is going to probably end 2014 with something like 25 billion in total profit - it gives it a lot of breathing room to go find new ways to grow. I'm OK with them spending 3 billion last quarter in R&D. I'd rather see more of that and a bit lower marketing (those soccer commercials with Messi and such probably cost a fortune).

 

[Shlong]

That's because, unlike HTC or LG, Samsung has hundreds of thousands of employees, hundreds of companies, and represents a hefty chunk of South Korea's economy. That $4B profit is spread pretty thin when you have to dump a lot of that money into R&D, pensions, dividends, etc...

Last year their profit was $10B, now it's $4B. When/If it starts turning to losses, it'll have catastrophic consequences throughout the Samsung empire and S. Korea. That is why it's so serious. To have a dominant division is bad enough. But to have a dominant company in a country is even worse. And right now, a lot is riding on Samsung Mobile...

That 4B profit is after all the money that's given to employees. They don't really have pensions and right now they don't give dividends to stock holders. They have over $60 Billion in cash. Doom and gloom should be looked at companies such as Sony, losing money every quarter with no positive signs of turn-around in the near future and having to resort to selling buildings for cash.

If you look at all the money Samsung spends on advertising, American TV corporations will have it in their best interest for Samsung to succeed.

 

[Dari]

I think Samsung Electronics is at a cross roads, but the doom and gloom is stupid.

Samsung as a whole maybe - of which Electronics is one division - has dozens of divisions. Yes it generates a lot of the profit, but a lot of these 40-odd divisions (Construction, Chemicals, Shipping, etc) I think exist solely to employ people and make some money while at it.

Secondly things like R&D, wages, etc are obviously part of their costs. That's how Samsung Electronics' 44 billion in sales turns into something like 4 billion in profit for the quarter.

And Samsung Electronics is going to probably end 2014 with something like 25 billion in total profit - it gives it a lot of breathing room to go find new ways to grow. I'm OK with them spending 3 billion last quarter in R&D. I'd rather see more of that and a bit lower marketing (those soccer commercials with Messi and such probably cost a fortune).

As an economist I do not think it's stupid. I think it's something that Samsung economists and S. Korean economists need to think about. Commodization of smartphones will have a huge impact on the company and lower profits will force adjustments. Also, R&D may be part of cost but not expansions or the purchase of new equipment for the building of new facilities for new tech wrt memory, processors, displays. Those equipment are expensive and no company will take cash out of the piggy bank for that. Money for that comes from bonds or loans. With falling profits, investors may be hesitant to put money in.

That 4B profit is after all the money that's given to employees. They don't really have pensions and right now they don't give dividends to stock holders. They have over $60 Billion in cash. Doom and gloom should be looked at companies such as Sony, losing money every quarter with no positive signs of turn-around in the near future and having to resort to selling buildings for cash.

If you look at all the money Samsung spends on advertising, American TV corporations will have it in their best interest for Samsung to succeed.

$60B is nothing for a company Samsung's size. Apple is much smaller and has far more. I'm glad you mentioned SONY because Samsung may have to downsize like SONY. The difference being SONY did not carry Japan. Samsung carries S. Korea and their downsizing will have ripple effects throughout that country's economy.

 

[dawheat]

As an economist I do not think it's stupid. I think it's something that Samsung economists and S. Korean economists need to think about. Commodization of smartphones will have a huge impact on the company and lower profits will force adjustments. Also, R&D may be part of cost but not expansions or the purchase of new equipment for the building of new facilities for new tech wrt memory, processors, displays. Those equipment are expensive and no company will take cash out of the piggy bank for that. Money for that comes from bonds or loans. With falling profits, investors may be hesitant to put money in.



$60B is nothing for a company Samsung's size. Apple is much smaller and has far more. I'm glad you mentioned SONY because Samsung may have to downsize like SONY. The difference being SONY did not carry Japan. Samsung carries S. Korea and their downsizing will have ripple effects throughout that country's economy.

Wow it's like Samsung didn't carry Korea's economy before 2012 before their smartphone share took off.

And comparing any company to Apple is pointless when it comes to generating cash. Samsung is probably in the top 5 globally - in an era of unheard cash reserves - whatever the current mix of Apple, Microsoft, Google, and Samsung is. Unless your trying to make a point that unless you have more cash than any company in history, it's nothing?

Sony can be a cautionary tale for Samsung, but I don't think they ever did even half of Samsung Electronic's annual sales - even in their best years.

<Edit> actually it's more like a 1/3 of sales, and close to 1/4 these days.

 

[Dari]

Wow it's like Samsung didn't carry Korea's economy before 2012 before their smartphone share took off.

And comparing any company to Apple is pointless when it comes to generating cash. Samsung is probably in the top 5 globally - in an era of unheard cash reserves - whatever the current mix of Apple, Microsoft, Google, and Samsung is. Unless your trying to make a point that unless you have more cash than any company in history, it's nothing?

Sony can be a cautionary tale for Samsung, but I don't think they ever did even half of Samsung Electronic's annual sales - even in their best years.

<Edit> actually it's more like a 1/3 of sales, and close to 1/4 these days.

Of those firms you mentioned, Samsung is the exception. It is by far the largest with many more firms under its belt and heavy capital expenditures. None of those American companies do heavy capital spending and they all have cash cows they can lean on because of their respective monopolies. Samsung is different. Their cash can easily be exhausted if things continue the way they are. Profits dropping 60% in a year means bad news going forward. With many mouths to feed, things don't look too good. Daddy Warbucks Samsung is not.