Samsung Electronics predicts first drop in profit in 3 years

Samsung Electronics confirmed it is likely to register its first drop in profit in three years in preliminary guidance for the fourth quarter of 2014, although its predicted figure for the quarter beat analyst estimates for the period.

The South Korean vendor predicts operating profit in the fourth quarter of 2014 will hit KRW5.2 trillion (€4 billion/$4.7 billion), the median of its expected profit range of KRW5 trillion to KRW 5.4 trillion. Average sales for the quarter are expected to be KRW52 trillion, based on a range of KRW51 trillion to KRW 53 trillion.

In a statement, Samsung noted that Korean disclosure regulations require it to report firm figures rather than providing estimated ranges.

Samsung's median operating profit figure is down from the KRW8.3 trillion the company generated in the final quarter of 2013, but beat the mean forecast of KRW5 trillion predicted by analysts in a Reuters poll. Based on the guidance, the news agency predicts Samsung's 2014 profit will be around KRW25 trillion, which would mark its weakest annual earnings in three years.

The Financial Times reported the predicted annual profit figure would be 32 per cent lower than Samsung achieved in 2013, but noted that investors appeared happy with the company's forecasts, as reflected in a 1.1 per cent rise in Samsung's share price in early trading in Seoul.

BNP Paribas analyst Peter Yu told the FT that Samsung's fourth-quarter figures were lifted by increased earnings at its semiconductor and display businesses, which were boosted by a strengthening U.S. dollar relative to the won.

While Samsung remained the world's largest mobile device vendor in the third quarter of 2014, Gartner analysts noted the company's market share fell from 32.1 per cent in Q313 to 24.4 per cent in Q314. The analysts blamed a drop in sales of Samsung feature phones, and weakening demand for the company's smartphones in Western Europe and Asia.

This week, Kantar Worldpanel ComTech said Samsung's European market share declined in the three months to end-November, as part of a broader drop in sales of Android-powered devices in Great Britain, Germany, France, Italy and Spain--the region's five largest markets.

For more:
- see Samsung's preliminary earnings guidance
- read this Reuters report
- view this Financial Times article [sub. required]
- see this Independent report
- read this Gartner press release

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Gartner: Global smartphone sales grew 20.3% in Q3 2014
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