Electronics giant Samsung is bleeding on the smartphone side, with seven straight quarters of decline. The company hopes to correct that in the quarter ahead by beating Apple to the punch.
Samsung is set to roll out its next Galaxy Note phablet device in mid-August. That breaks the company’s release cycle, which usually sees new Note devices hit the market in September. The electronics giant needed to do something different because the Galaxy S6 didn’t drive the revenues it had hoped.
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 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.
Global Smartphone Sales Down
We caught up with Roger Entner, a principal analyst at Recon Analytics, to get this thoughts on Samsung’s move. He told us the company is working to pre-empt Apple’s next device: the iPhone 6S. Apple typically puts out its S-series of devices in the fall.
“Samsung wants to strike early, and not only announce the device but get it in consumers’ hands,” Entner said. “Overall, the industry, with the exception of Apple, which has finally done the right thing with a large-screen device, is suffering because it has run out of feature phones to rapidly cannibalize.”
Indeed, global smartphone sales are set to decline 11.3 percent in 2015, according to market research firm IDC. The company's analysts predict 1.44 billion smartphones will ship globally this year.
Three Troubling Factors
Ryan Reith, program director at IDC's Worldwide Quarterly Mobile Phone Tracker, said smartphone volume still has a lot of opportunity in the years to come, but two fundamental segments driving recent years' growth are starting to slow: shipments to China and sales of Apple’s larger iPhone.
"There's no question that a large chunk of Apple's installed base is still using older models (pre-iPhone 6/6 Plus), which leaves continued growth opportunity in the second half of 2015 and beyond," noted Reith. "In addition, IDC believes a sizable portion of the Android installed base were those who migrated over to the platform from iOS with the desire for a larger screen smartphone.”
Entner offers a third industry issue that’s hurting most players in the smartphone field -- equipment installment plans are aggravating the issue.
“Equipment installment plans have led to a longer handset replacement cycle,” he said. “That’s why you are also seeing the lease plans coming out now, which are aimed to accelerate handset replacement cycles. It’s all tied together.”