Samsung Electronics Co Ltd is the world's biggest mobile phones and television maker. But the company's mobile division is in trouble. Samsung's quarterly profits has plunged 60 percent due to weakening smartphone sales.
Reuters said that since 2011, Samsung is heading for its first annual profits fall after it revealed its July to September incomes would be the lowest in over three years and short-term visions for smartphones were unstipulated. According to Strategy Analytics, the company's mobile division has seen its global market share decrease in yearly terms for the past two quarters.
According to the guidance, Samsung's quarterly profits decline is a result of dropping in the mobile business due to intensified smartphone rivalry. Forbes reported that the company's continuing answer to falling revenue and profits in its mobile division is to double-down on the existing hardware line-up through innovative material and state-of-the-art design and strong competitive pricing at the lower half of the collection.
BBC News Business also said that Samsung's mobile division has been struggling to maintain its dominance against competitors such as Apple and Chinese smartphone manufacturers Lenovo and Xiaomi. The company's lead, Galaxy smartphone line has been losing market share to cheaper models that also have large screens and multiple features. On the other hand, Samsung shares rose about 1.6 percent in Seoul despite the weak profit outlook.
On Tuesday, Samsung said in a regulatory filing that operational profit for the third quarter likely plunged almost 60 percent to 4.1 trillion won or about $3.8 billion. It noted the South Korean giant's weakest quarterly profit since the second quarter of 2011 and the fourth consecutive quarter of incomes falloffs on an annual basis.
"Smartphone shipments increased marginally amid intense competition. However, the operating margin declined due to increased marketing expenditure and lowered average selling price," Samsung said in a statement.
Several analysts and investors believe that the best days are behind Samsung's mobile division as it will require sacrificing margins to keep cheaper Chinese phones seizing more of its turf. The company said that smartphone business' operating margin substantially plunged in the quarter due to higher marketing expenses and suddenly lower average selling price.
Samsung has been smartphone era's standout success, specifically in terms of building market share. And despite its mobile division's declining profits, the company is still holding the top spot on smartphone dominance. However, the competition and expenditures are pushing an intense pressure on its revenues.
