This site uses cookies to improve your experience and to provide services and advertising. By continuing to browse, you agree to the use of cookies described in our Cookies Policy. You may change your settings at any time but this may impact on the functionality of the site. To learn more see our Cookies Policy.
OK
#Open journalism No news is bad news

Your contributions will help us continue to deliver the stories that are important to you

Support The Journal
Dublin: 19 °C Friday 14 August, 2020
Advertisement

Samsung is expecting another decline in profits despite Galaxy S6 launch

The company has forecast another fall in quarterly profits, suggesting that sales of the Galaxy S6 failed to meet expectations.

Image: Laura Lean/PA Wire

SAMSUNG FORECAST A fall in second quarter profit in a sign that sales of its much anticipated Galaxy S6 smartphones failed to meet expectations.

Samsung on Tuesday estimated its second-quarter operating profit at 6.9 trillion won (€5.5 billion), down 4% from a year earlier. The result represents a 15% gain from the previous quarter but it was lower than the 7.23 trillion won forecast in a FactSet survey of analysts.

Sales declined 8% from a year earlier to 48 trillion won, falling short of the FactSet forecast of 52.8 trillion won. The South Korean company will release its full result for the quarter later this month.

When Samsung began sales of its Galaxy S6 and S6 Edge smartphones in April, there were expectations that the new flagship devices would lead a revival at Samsung’s handset business, which suffered a stunning decline last year.

It retained the title of the world’s largest maker of smartphones, but its market share declined, squeezed by Apple in the premium market and by Chinese companies in the low-end market.

Within Samsung, development of the Series 6 smartphones was dubbed “Project Zero,” signifying the company’s efforts to recapture the winning formula of its earlier phones.

South Korea Samsung New Smartphone Source: AP Photo/Ahn Young-joon

Issues 

Samsung was hit by two problems with its Galaxy S6 series. The regular version of the phone, the Galaxy S6, wasn’t as popular as expected, while the S6 Edge model, which features a display that curves on both sides that is more difficult to produce, couldn’t keep up with demand.

“The failure to manage the initial shipment for the Galaxy S6 series is the primary reason” for disappointing sales, said Lee Ka-keun, an analyst at KB Securities. “Demand for smartphones and other IT products were also weak.”

Samsung’s smartphone sales were also hit by a new law that was enforced in South Korea last year, which barred handset vendors from giving hefty subsidies to phone buyers. The measure has been a boon to Samsung’s rival Apple, whose iPhone sales in South Korea grew. Apple’s newest models also featured larger screens that were similar in size to the Samsung phones, removing one of Samsung’s advantages.

Counterpoint Technology Market Research, a market research firm, said last month that Samsung sold 6 million Galaxy S6 and S6 Edge smartphones by the end of April, selling at a faster rate than its 2014 predecessor model.

But the research firm said the chance of Samsung’s flagship models overtaking Apple’s iPhone 6 series was small due to production constraints for the curved glass.

Analysts have lowered profit forecasts for Samsung in recent weeks citing the weaker-than-expected sales of its flagship smartphones. Last month, Nomura Securities cut its estimate of Samsung’s smartphone shipments during the second quarter to 75 million units, down 11% from its earlier forecast. Other brokerages also cut their forecasts.

Read: With the Galaxy S6, Samsung has created its best smartphone in ages >

Read: This is the Nintendo PlayStation that never saw the light of day >

  • Share on Facebook
  • Email this article
  •  

About the author:

Associated Press

Read next:

COMMENTS (19)

This is YOUR comments community. Stay civil, stay constructive, stay on topic. Please familiarise yourself with our comments policy here before taking part.
write a comment

    Leave a commentcancel