ELECTRONICS giant Samsung has seen its net profit drop by 8% for the second quarter of the year.
Profit for the quarter from April to June fell to 5.75tn won (£3.2bn, $4.9bn), down 8% from last year.
The results are in line with the South Korean company’s earnings guidance, given earlier this month.
The firm’s smartphone section continues to suffer from stiff competition from Apple’s iPhone and cheaper Chinese rivals.
The result marks the fifth straight quarterly profit drop for the company.
“While the numbers are in line with what’s been expected, the real story is that Samsung used to be this huge industry giant, dominating the smartphone field. And now that giant seems to be tumbling under pressure from Apple in the top-segment and cheaper Chinese competitors,” Bryan Ma, vice president of client devices research at technology consultants IDC, told the BBC.
He said the company could in theory compete with the cheaper Chinese rivals “but it would hurt their margins. And then, even with good sales, it would hurt their profit.”
“When it comes to competing with the iPhone – Apple has an entire ecosystem around their devices which Samsung just doesn’t have.”
Smartphone headwinds
Profit for the mobile division though fell to 2.76tn won from 4.42tn won a year earlier.
Samsung said that sales of its Galaxy S6 smartphone fell short of expectations because the company could not meet the demand for its flagship model.
According to the vice president for mobile business, Park Jin-Young, the company hopes to see its phone sales increase in the coming quarter with new large-screen and budget models to be launched.
Samsung has seen profits sag since late 2013 due to increasing competition in the smartphone market the company had dominated for years.
What used to drive the company, Ma explains, was their strength in hardware and engineering.
“That’s what gave them the edge in the past – they were for instance ahead of Apple with their large screen phablets. If they manage to stay ahead of the curve, they can still turn things around.”
The firm’s best performance for the quarter came from its semiconductor department, helping to narrow the profit decline. ( BBC News )
Link: http://www.bbc.co.uk/news/business-33713686
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