Suffering from ailing smartphone sales, Samsung Electronics will once again miss its earnings estimate. That will mark seven straight quarters the Korean electronics giant has missed the mark.
In a published earnings estimate, the company predicted operating profit to hit about 6.9 trillion Korean won, or $6.1 billion, for the three months ending in June 2015. That’s down a little over 4 percent from the same period a year ago. That stands in contrast to the 7.2 trillion won average -- about $6.3 billion -- of 33 analyst estimates compiled by Bloomberg. The official earnings report will roll out later this month.
At the heart of the discussion is the Samsung Galaxy S6 and the Samsung Galaxy S6 Edge, with its curved edges. The company had high hopes for the devices. Samsung probably could have sold more of the Galaxy S6 Edge phones, but the company didn’t produce enough to keep up with demand.
By contrast, the Galaxy S6 wasn’t nearly as popular as the company had hoped. In fact, Lee Sang-Chul, executive vice president and head of mobile sales at Samsung, had made this bold statement: “Considering the response from the market, consumer and carriers, we expect the S6 will see record sales among the previous S series.” That didn’t quite work out.
Pressure from All Sides
We caught up with Avi Greengart, an analyst at Current Analysis, to get his thoughts on Samsung’s long string of quarterly earnings woes. He told us Samsung is feeling the heat from all sides.
“Samsung is under pressure at the high end from Apple and under pressure everywhere else from value-oriented Chinese producers,” Greengart said. “Samsung is not alone in this issue.”
Indeed, Samsung is not the only Android-powered smartphone maker that’s seeing sales slip. HTC has experienced major losses in recent quarters and Sony is not doing much better. Of course, BlackBerry isn’t competing well with its own operating system.
“LG thus far is still growing against Samsung. But at the high end where Samsung makes the most of its profits, Apple is doing more than holding its own,” Greengart said. “Apple is gaining share against Samsung, especially with the larger iPhone 6 and iPhone 6 Plus phones. The competition in the midrange is incredibly intense and making it difficult for Samsung to justify premiums.”
So where does Samsung go from here? The company’s first step is to stabilize the mobile handset business, Greengart said. To an extent, Samsung has already done that, he added. Nevertheless, Samsung is still bleeding.
“Samsung had hoped the Galaxy S6 would vastly outsell the Galaxy S5 and that does not appear to be happening. But on the flip side, from what I’ve seen, sales don’t seem to be dropping dramatically from that point either,” Greengart said. “Samsung needs to get its costs in line with its sales and figure out how to make money outside of the premium range.”
Posted: 2015-08-17 @ 9:10am PT
I had two Galaxy S6 phones that were bad within 30 days of being out of the box. The performance of this phone is nothing compared to the S5 and you took away the removable battery and the SD card -- not what any of us wanted but were willing to deal with it for the faster charge, better processor, etc. I was offered to be out of my contract with my carrier because I was told I had marginal coverage. Come to find out the S6 wasn't connecting to the towers properly. So once I changed phones back to the S5 and an HTC M9 -- no problems. Disappointed in this model and have had every Galaxy since the first one came out.