Samsung Keeps Profit Steady As Mobile Sales Decline

Apr 29 2014, 4:43am CDT | by

Samsung Electronics is softening the blow from a increasingly-difficult market for its high-margin phones by keeping costs in check, and by gearing up to sell more TVs for the World Cup.

The company released its first quarter results on Tuesday morning in Seoul which were largely in line with its forecasts earlier this month: group sales declined by 9%, but net profit rose by 5.9% year on year to 7.57 trillion won ($7.3 billion). Sales at its all-important IT and Mobile communications division slid by 4% quarter-on-quarter.

Samsung, which derived more than two thirds of group operating profit from its smartphone making devision, blamed a “decline in mobile services demand” along with the typical weak seasonality of the year’s first quarter.

But it kept profits in check by “efficiently managing marketing expenses.”

Samsung also expects its display panel business to improve later this year thanks to the World Cup effect, as consumer invest in the latest high-density pixel television sets to watch the soccer tournament which runs from June 12 to July 13 in Brazil.

Samsung is still the world’s biggest smartphone maker, and its latest high-end Galaxy S5 smartphone also appears to be selling faster than last year’s S4, according to figures provided to Forbes by one of its popular third-party services.

But research out today from Strategy Analytics also shows the company’s market share slipped to 31% from 32%, in the first quarter of 2014, thanks to increasing competition over cheaper, mid-tier devices.

Huawei and Lenovo in particular are ramping up the competitive pressure according to Strategy Analytics Neil Mawston, who said the Chinese smartphone makers had captured 5% of the global market for smartphones just in the first quarter.

Global smartphone shipments grew overall in the first quarter from last year, but demand was healthiest in Asia and sluggish in North America, due to “changes in the operator subsidy mix.”

“This was Samsung’s first annual marketshare loss in the smartphone category since Q4, 2009,” said Mawston. “Samsung continues to face tough competition from Apple at the higher-end of the smartphone market and from Chinese brands like Huawei at the lower-end.”

 
 

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