Samsung Electronics Co said yesterday its annual profit fell for the first time in three years as its smartphone growth lost steam.
The company’s operating profit for last year is expected to be about 24.9 trillion won (US$22.7 billion), down 32 percent from 2013, based on preliminary figures. It will release its full financial results, including net profit and a breakdown of business divisions, later this month.
For the fourth quarter of last year, Samsung said operating profit was about 5.2 trillion won, down 37 percent from a year earlier. The result was still higher than analyst expectations of 4.9 trillion won according to FactSet, a financial data provider, due to robust demand for memory chips.
Analysts said that Samsung’s smartphone business, which contributed two-thirds of its profit in the past two years, continued to struggle, but improvements in its semiconductor division helped the company rebound from the third quarter, its worst quarter in nearly three years.
“It’s time to see Samsung as a semiconductor company,” Woori Investment & Securities analyst Lee Sei-cheol said.
Quarterly sales dropped 12 percent to 52 trillion won, in line with the expectations of analysts.
Samsung’s semiconductor division, which develops memory chips, mobile processors and solid state drives, will generate more profit than Samsung’s Galaxy phone sales this year, according to Lee and other analysts.
Samsung’s Galaxy smartphones were all the rage in 2012 and 2013, pushing the South Korean phone maker past Nokia, Motorola and Apple Inc in sales volume.
However, that growth stopped last year partly because of missteps in Samsung’s flagship models and it had to heavily discount older phone models to keep them selling.
The company was also squeezed in the low and mid-end phone segments by Chinese smartphone makers such as Xiaomi Corp (小米) which surpassed Samsung in China and India.
Analysts said Samsung’s smartphone business is unlikely to repeat the growth momentum it had in the past. Growth instead will come from demand for memory chips, but that gain will not be enough to stop Samsung’s earnings from dropping again this year, they said.
To develop new revenue sources other than smartphones and semiconductors, Samsung is pushing hard in the emerging industry known as the Internet of Things, with Internet-connected televisions, smart homes and smart cars.
BK Yoon, Samsung president of consumer electronics, said earlier this week that by 2017 all Samsung televisions will be Internet connected. He also said that in five years all Samsung hardware products will be ready for the Internet of Things.
The company is taking its software, which is designed to challenge Google’s Android operating system, to television sets. Samsung said that its all-new Internet-connected televisions this year will run on Tizen, its own operating system.
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