Samsung Electronics forecasts 60% fall in quarterly profit

[sm625]

Maybe samsung's CEO should ... come out of the closet. That ought to be good for an additional $4billion in revenue. In all seriousness, who could be surprised by this when the galaxy S5 is the same thing as the S4. They just keep adding pixels but its a waste. I'm not buying anything with more than 1080p because you just cant see it. Hell, the only reason to even go 1080p is because its pretty much at price parity with 720p, but really all you need is 720p on a phone. The galaxy SIII blows away a galaxy SII, same goes for an SII vs a S, but when you get past SIII the returns really start to get questionable.

 

[Chrono]

Maybe samsung's CEO should ... come out of the closet. That ought to be good for an additional $4billion in revenue. In all seriousness, who could be surprised by this when the galaxy S5 is the same thing as the S4. They just keep adding pixels but its a waste. I'm not buying anything with more than 1080p because you just cant see it. Hell, the only reason to even go 1080p is because its pretty much at price parity with 720p, but really all you need is 720p on a phone. The galaxy SIII blows away a galaxy SII, same goes for an SII vs a S, but when you get past SIII the returns really start to get questionable.

So... are you saying the iphone6/6plus aren't just bigger iphone5ses? I think it has to do with the fact that cell phones are hitting a point where it doesn't make sense to upgrade to the next version immediately anymore. From s3 to s5... most software runs well on the s3... so basically it's hitting a finite point where returns are minimal versus your example of s2 to s3.

 

[Dari]

Seriously - for a company that sold 78.1 million smartphones last quarter and made more profits than all other Android manufacturers combined, it seems ridiculous to suddenly declare that they're dead.

They're paying for the shotgun strategy of releasing a hundred models - all which cost R&D, distribution, and marketing - while at the same time releasing a relatively lackluster flagship (S5) which still sold more than any other Android flagship.

I think Samsung has been responding to this wakeup call for a couple quarters, but it's only going to start showing in the upcoming quarters. Fewer models, higher quality - which for Samsung still probably means a couple dozen models. But the Note 4 is a great kit and shows Samsung can still make the best phone in a segment. It stands and wins on its own merits. The A5 and A7 show they're serious about improving quality even at the mid-range.

However the S6 launch will probably be the most important launch for their smartphone division...ever. Not only does it need to have the newest and best inside, it'll need to combine an ever better build than the Note 4 + a display that extends its lead, and a fresh approach to TW with Lolippop. Luckily they're still making billions a quarter to let them react from a position of wealth.

You think any of that will make a difference when the price is still $700/phone? Also, why do you think they're willing to sell their Note 4 flagshi[ with a $200 rebate?

We all know that Samsung packs their phones with a plethora of features. The problem is that they've built their empire vertically so when margins start to shrink, as they should when smartphones become commodity products, that vertical integration is going to hurt real bad. Because of the way the company is setup, they need to move hundreds of millions of units or else everything comes crashing down.

To answer the question I asked, they are offering the rebate to keep the ship afloat. But investors are not stupid and they will start to jump ship because, unlike Apple, Samsung offers no walled garden to monetize their phones after the initial sell.

 

[StrangerGuy]

Maybe samsung's CEO should ... come out of the closet. That ought to be good for an additional $4billion in revenue. In all seriousness, who could be surprised by this when the galaxy S5 is the same thing as the S4. They just keep adding pixels but its a waste. I'm not buying anything with more than 1080p because you just cant see it. Hell, the only reason to even go 1080p is because its pretty much at price parity with 720p, but really all you need is 720p on a phone. The galaxy SIII blows away a galaxy SII, same goes for an SII vs a S, but when you get past SIII the returns really start to get questionable.

At the the low end of things they even have the gall to want 20% extra with a 1.2GHz dual core, 800x480/5MP phone over something like Xiaomi Redmi 1S with Snapdragon 400/720P/8MP and a MIUI that beats the shit out of lagwiz. That's fvcking delusional.

 

[Fingolfin269]

Just in comparison to other quarterly announcements today:

- HTC announced a profit of $19 million dollars this quarter
- Sony shipped 9.9 million smartphones

So Samsung has a lot of work to do and their newest phones are a step in the right direction. But there has to be some perspective - there's basically Apple standing alone, then Samsung, and then a long tail of no money.

That's a nice number for Sony but as a company they're hurting pretty badly right now.

http://money.cnn.com/2014/10/30/technology/sony/index.html?hpt=hp_t4

 

[Dari]

I think people are too focused on TW and not on what really counts here, the price. This is why Samsung is struggling, not because of their design. If their phones were the same price as the Chinese, they would be doing just fine. But they can't afford that because they've tried to corner almost every aspect of the components of phones and that requires massive investments. If sales continue to fall, the company will not be able to carry itself and will have to break apart. It's the story of every conglomerate, ever.

 

[dawheat]

I think people are too focused on TW and not on what really counts here, the price. This is why Samsung is struggling, not because of their design. If their phones were the same price as the Chinese, they would be doing just fine. But they can't afford that because they've tried to corner almost every aspect of the components of phones and that requires massive investments. If sales continue to fall, the company will not be able to carry itself and will have to break apart. It's the story of every conglomerate, ever.

Eh its too early to think the sky is falling. Memory has certainly paid off for them. Displays will be an interesting area as the quality of the newest AMOLEDs make them a differentiation and I don't think it'd be unrealistic to see more OEMs besides Motorola become customers. I think they pointed to increasing shipments of high end OLED displays to drive future growth.

But for sure, moving the mix of smartphone sales back toward the higher end is critical for Samsung. However if they can't and the high end market for Android handsets eventually takes a permanent haircut, frankly I'd think we'd all suffer. 2nd tier OEMs like HTC, Sony, and LG aren't going to survive in the smartphone space if flagships start going for under $500.

The last thing we all want is to have Chinese OEMs control the future of Android hardware in a PC-like race for the bottom. I want and am willing to pay for the very best $750 can get me. I'd hate to only have choices in the $300-400 range that are all compromised.

 

[lopri]

Not at all surprising. The market is quite saturated and the choices for consumers are unprecedentedly plentiful.

 

[StrangerGuy]

The last thing we all want is to have Chinese OEMs control the future of Android hardware in a PC-like race for the bottom. I want and am willing to pay for the very best $750 can get me. I'd hate to only have choices in the $300-400 range that are all compromised.

What? If anything, the Chinese OEMs made the Android scene far better. It's not their fault when Samsung chooses to keep making plasticky cheap feeling bloatware-infested high end phones for a long time or Sony using lousy LCDs on the Xperia Z/Z1.

 

[kaerflog]

Maybe samsung's CEO should ... come out of the closet. That ought to be good for an additional $4billion in revenue. In all seriousness, who could be surprised by this when the galaxy S5 is the same thing as the S4. They just keep adding pixels but its a waste. I'm not buying anything with more than 1080p because you just cant see it. Hell, the only reason to even go 1080p is because its pretty much at price parity with 720p, but really all you need is 720p on a phone. The galaxy SIII blows away a galaxy SII, same goes for an SII vs a S, but when you get past SIII the returns really start to get questionable.

I actually agree with most of what you said.
720p is really all you need for phones. They should have stopped at 1080p. Focus on battery life.
What I don't agree is that the S3 runs slow compared to standards now.
The standard should be the LG G2. 1080p, Snapdragon 800, 5.2" screen, long battery life. You really don't need any beyond the G2 nowadays.

 

[ponyo]

That's a nice number for Sony but as a company they're hurting pretty badly right now.

http://money.cnn.com/2014/10/30/technology/sony/index.html?hpt=hp_t4

Sony will be fine. As an investor in Sony, I love seeing articles like this. All the gloom and doom stories and negative news and the stock is nearly back to where it was before they threw out the kitchen sink month or two back.

 

[mrochester]

The biggest problem Samsung has is a lack of differentiation. I always knew using Android would bite these manufacturers hard, and I'm so glad I didn't buy into the Android hype.

 

[shabby]

I always knew using Android would bite these manufacturers hard, and I'm so glad I didn't buy into the Android hype.

So if they didn't use android they'd be better of?

 

[mrochester]

So if they didn't use android they'd be better of?

Yep, because they'd be able to differentiate from one another and keep customers coming back to their products.

 

[Dari]

Eh its too early to think the sky is falling. Memory has certainly paid off for them. Displays will be an interesting area as the quality of the newest AMOLEDs make them a differentiation and I don't think it'd be unrealistic to see more OEMs besides Motorola become customers. I think they pointed to increasing shipments of high end OLED displays to drive future growth.

But for sure, moving the mix of smartphone sales back toward the higher end is critical for Samsung. However if they can't and the high end market for Android handsets eventually takes a permanent haircut, frankly I'd think we'd all suffer. 2nd tier OEMs like HTC, Sony, and LG aren't going to survive in the smartphone space if flagships start going for under $500.

The last thing we all want is to have Chinese OEMs control the future of Android hardware in a PC-like race for the bottom. I want and am willing to pay for the very best $750 can get me. I'd hate to only have choices in the $300-400 range that are all compromised.

I think it's wishful thinking to believe that a regression to premium only will help Samsung in anyway. Look at all the components they make for phones. They need volume to stay afloat. But they just can't keep selling the majority of parts to themselves and expect things to stay the same. THey also cannot rely on $700 phones forever. Specialized firms will always be faster and more efficient. That means cheaper. And OEMs will demand cheaper component prices going forward. Consumers have gotten a taste for cheap high-end phones and they will demand more going forward (look at the recent outrage over Nexus 6).

Fact is, companies like SONY do not manufacturer most (or any) of the components in their phones so lower prices won't be a multiplier throughout their firm.

Samsung is doing fine with memory right now but, as with all components, there are swings.

 

[poofyhairguy]

Yep, because they'd be able to differentiate from one another and keep customers coming back to their products.

And we would all have to deal with dozens of app stores without one having anything remotely competitive to what iOS has (ala Amazon's devices). No, that is a crappy "solution."

One of the best things about Android is that you aren't forced to be brand loyal. Samsung, HTC, Sony, etc. get out of the game because the margins get too tight? Well then my Google Play account will load onto a Chinese phone just as easily. There is a risk that we won't have any quality options that way, but I doubt it. HTC for one just got back into black, mostly by offering handset quality.

The crazy subsidy market means that the unlocked prices of phones are nuts, but it also means that $750 flagships will have a steady market and a two year replacement cycle. What we need are some more bold ideas either through design of the hardware (M8) or software (Moto x). That is how you stand out in Android.

Samsung was living off the brand mostly, allowing the marketing budget to sell a boring product. I think the Alpha and the metal ring on the Note 4 is an indication that they aren't going to rest on their laurels with all plastic phones much longer. I expect the S6 to be solid.

 

[Mopetar]

Not at all surprising. The market is quite saturated and the choices for consumers are unprecedentedly plentiful.

I think the true problem for Samsung is that the competition has actually started making decent phones. When Samsung was rising, LG hadn't made a compelling device yet, HTC was churning out derivatives of the EVO that were mostly horrible, and Motorola wasn't doing anything special either.

Now all of those companies are making some compelling products and even Sony is making phones that have people excited. Apple also caved and started making big phones and there were probably a lot of Note users that couldn't care less about Samsung or Android but just wanted a phablet.

Yep, because they'd be able to differentiate from one another and keep customers coming back to their products.

That requires having something at least as good as Android. They don't and based on Touchwiz and the apps that they've developed, I don't think that they could make something on their own that could compete. They tried with Bada, but that's more of a feature-phone OS, and at this point creating a modern smartphone OS is a lot of work. Look how long it's taken a company like Microsoft that has a lot of experience in developing these kinds of things to catch up.

 

[shabby]

Yep, because they'd be able to differentiate from one another and keep customers coming back to their products.

They'd never be in a position to start from scratch, now they can experiment with tizen, but not 4-5 years ago.

 

[Commodus]

I get the sense that Samsung would have had to commit to its own OS a long, long time ago for that strategy to work now. Problem is, it's too much of an opportunist; it's so obsessed with short-term gains that it rarely pours enough energy into its in-house platforms to make them stick. Remember Bada? Yeah. Even when fresh, it was purposefully relegated to second fiddle status.

Apple keeps doing well because it both had an early advantage with its in-house software (OS X development) and, importantly, stuck to its guns. The company does so many things itself precisely to avoid the kind of situation Samsung is in -- it doesn't want to be a slave to someone else's work and have trouble standing out in a crowded market.

Look at what happened in the Windows PC space. Vendors gladly chained themselves to Windows so long as it was thriving and mobile devices were merely niche products. However, that became more of a curse than a blessing; they were forced to compete primarily on price, and the impact of mobile on PC sales has left many of these vendors stuck on a sinking ship. Samsung had better hope that Android doesn't plateau and face a similar fate, because it doesn't really have a backup plan.

 

[Dari]

I think Samsung was banking on the subsidized market lasting forever. That is why they can overprice their phones to carriers and expect customers to pay $299/$199/$99/$0. But with unsubsidized prices getting more prominent thanks to these new payment plans, that puts a giant hole in Samsung's strategy. Low end phones that Samsung expected customers to get for $99 or $0 subsidized are costing carriers $500, which is absolutely outrageous and unacceptable in the days of Moto G or Nexus 5 or the Chinese OEMs. In places where subsidized phones are non-existent Samsung is getting hammered.

 

[StrangerGuy]

IMO, the funniest part of their current predicament is how they would rather spend tens of billions on marketing and to flood the market with thousands of different terrible low-end/midrange phones with all the associated logistics/inventory/support nightmare to paint themselves into a corner, instead of using the same money to make just one killer cheap phone to counter the Moto G and Xiaomi upstarts and sticking it all the way.

 

[kaerflog]

I think Samsung is in the same rut that HTC was once in.
Being the Android leader and rehashing the same phone that made it great.
Not that Samsung will ever be as bad as HTC but I see the resemblant.
I think LG have surpass Samsung as far as being innovative.

 

[michaelmicro]

They'd never be in a position to start from scratch, now they can experiment with tizen, but not 4-5 years ago.

I guess that's what they get for being short-sighted then.

 

[Commodus]

I think Samsung was banking on the subsidized market lasting forever. That is why they can overprice their phones to carriers and expect customers to pay $299/$199/$99/$0. But with unsubsidized prices getting more prominent thanks to these new payment plans, that puts a giant hole in Samsung's strategy. Low end phones that Samsung expected customers to get for $99 or $0 subsidized are costing carriers $500, which is absolutely outrageous and unacceptable in the days of Moto G or Nexus 5 or the Chinese OEMs. In places where subsidized phones are non-existent Samsung is getting hammered.

I don't think that's much of a factor. In China, where Samsung is hurting the most, off-contract sales and prepaid service have dominated for a long time. That's why you see so many low-cost phones originating from the area; the up-front price has to be affordable on a typical Chinese salary. Rather, the issue is that you're starting to see very cheap phones that are also genuinely usable, like the Xiaomi Red Rice or even North America-friendly phones like the Moto E. Samsung has phones in that price range, but they tend to be truly terrible... as in, you're thankful if you have a 3.5-inch screen and 3G.

In North America, I don't see the shift away from contracts being all that deleterious to Samsung. We typically have more money, so we're not as price-sensitive; also, the payments are usually spread out over two years anyway. It's hard to worry about paying $25 a month for a device instead of $15. If there's anything Samsung has to freak out over in highly developed areas, it's that the company just lost its only real marketing edge over Apple (screen size).

 

[Dari]

I don't think that's much of a factor. In China, where Samsung is hurting the most, off-contract sales and prepaid service have dominated for a long time. That's why you see so many low-cost phones originating from the area; the up-front price has to be affordable on a typical Chinese salary. Rather, the issue is that you're starting to see very cheap phones that are also genuinely usable, like the Xiaomi Red Rice or even North America-friendly phones like the Moto E. Samsung has phones in that price range, but they tend to be truly terrible... as in, you're thankful if you have a 3.5-inch screen and 3G.

In North America, I don't see the shift away from contracts being all that deleterious to Samsung. We typically have more money, so we're not as price-sensitive; also, the payments are usually spread out over two years anyway. It's hard to worry about paying $25 a month for a device instead of $15. If there's anything Samsung has to freak out over in highly developed areas, it's that the company just lost its only real marketing edge over Apple (screen size).

Not necessarily. I read a WSJ article last month where they said that these T-Mobile like plans have shaken up the mobile industry in America. They went from nothing 2 years ago (or whenever they started) to 48% of contracts now. These plans are essentially no contract plans where a customer can leave anytime. With these plans, customers are becoming more conscious of the price of the phones, which factors into their decision-making. Carriers like them because they're no longer subsidizing the phones. The real losers are companies like Samsung/LG. The winners are peddlers of cheap phones. Naturally, Apple is immune (to an extent).