Wed, Jan 08, 2014 - Page 15 News List

Samsung’s earnings drop for first quarter since 2011

WHAT GOES UP:The firm’s operating profit fell 6 percent annually to snap two years of growth and shock analysts, who attributed it to weakening phone and tablet sales

AP, SEOUL and LAS VEGAS

Samsung Electronics Co’s quarterly earnings have fallen for the first time in two years, as sales of smartphones and tablets slow in developed countries.

The South Korean company yesterday estimated an operating profit of 8.3 trillion won (US$7.8 billion) for the final three months of last year, signifying a 6 percent annual decline.

The result fell below analysts’ forecasts and represented an 18 percent drop from the third quarter, while sales rose 5 percent to 59 trillion won in the same period.

Since the last quarter of 2011, Samsung’s operating income has increased every quarter, peaking at 10.2 trillion won in the July-to-September period last year.

The fourth-quarter performance shows that the explosive growth in the company’s lucrative mobile device business has come to a halt.

It will release its net profit results for the fourth quarter of last year later this month.

Analysts said that Samsung’s overall profit fell because its businesses that supply advanced displays and chips for Apple Inc’s iPhones, as well as its own Galaxy smartphones, posted smaller profits.

They said Samsung’s smartphone and Galaxy Gear smart watch businesses were not as lucrative as before because of higher marketing costs.

“It’s an earnings shock,” KDB Daewoo Securities Co analyst James Song said. “The profit at mobile communications business must have been much lower than expected although it’s likely that Samsung gave bigger bonuses to employees.”

Song had forecast that the South Korean giant would post 9.3 trillion won in operating profit.

Samsung’s smartphone business is also facing more competition in China.

Starting next week, Apple is scheduled to begin selling iPhones through China Mobile Ltd (中國移動), the world’s largest wireless carrier, a move that could threaten Samsung’s growth in the Chinese smartphone market.

Samsung had a 21 percent share of China’s smartphone sector during the third quarter, up from 14 percent a year earlier, while Apple’s share declined to 6 percent from 8 percent during the same period, research firm Canalys said.

Meanwhile, Samsung on Monday said it is tackling the problem of getting ultra-high-definition (UHD) content to its new television sets by teaming up with the Internet streaming services provided by Comcast Corp, Netflix Inc and Amazon.com Inc.

Like other television makers, the South Korean firm is betting that quadrupling the resolution of its sets will incite consumers to upgrade their existing HD versions.

The problem is that cable TV services and Blu-ray discs do not support the bump in resolution, leaving the ultra-sharp sets without content of matching quality.

At a press conference held during the International CES gadget show in Las Vegas, Nevada, Samsung said it would get UHD content through partnerships with US streaming services, bypassing traditional cable and disc delivery.

Under its partnership with Comcast, the US’ largest cable company, Samsung sets would get UHD content through an app running on the Internet-connected TV, bypassing Comcast’s set-top boxes.

Comcast owns movie and television studio NBCUniversal, giving it direct access to content shot in UHD, also known as 4K.

Similarly, Netflix, the largest provider of paid streaming video, shot its House of Cards series in 4K and has already said it will supply the program in that format to televisions from LG Electronics, Samsung’s local competitor.

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