Samsung's expected earnings for the second quarter came in far below analyst expectations, according to reports, an indication that sales of high-end smartphones could be finally slowing after years of frenetic growth.
To be clear, Samsung's expected operating profit for the second quarter would be welcome news for almost any other vendor: The company said it expects an operating profit of $8.2 billion for the period (up 47 percent from the previous year) on sales of $49.4 billion. However, that figure is below the $8.7 billion operating profit that analysts had expected. Samsung--the world's largest maker of mobile devices, including smartphones--earlier this year released its Galaxy S4 smartphone, its flagship Android smartphone for the year and the product many expect to drive overall sales at the South Korean electronics conglomerate.
Samsung is scheduled to post its full second quarter report later this month.
"The market's viewpoint needs to be lowered," Lee Jin Woo, a fund manager at Seoul-based KTB Asset Management Co., told Bloomberg on reviewing Samsung's second quarter projections. "Having missed that 10 trillion-won number ($8.7 billion) proved that the recent concern over the high-end smartphone market saturation and margin squeeze was for real."
Analysts generally noted that Samsung's expected second-quarter performance, coupled with sluggish reports from BlackBerry (NASDAQ:BBRY), HTC and Apple (NASDAQ:AAPL), indicates sales of high-end smartphones could be cooling. Indeed, according to comScore 59 percent of all Americans now own smartphones, meaning that there are fewer wireless users to upgrade from a feature phone to a smartphone.
C.W. Chung, an analyst at Nomura Securities, told the New York Times that the smartphone market could now be saturated at the high end, where established players like Samsung and Apple continue to battle upstarts like Sony and Huawei. Chung warned that the smartphone market could eventually follow the path carved by the PC market, where vendors struggle to rise above the competition and shoppers evaluate products mainly by price.
Others, however, voiced a more positive outlook: Sanford C. Bernstein analyst Mark Newman told the NYT that he believes Samsung's profit will rise in the second half of this year.
Many analysts believe that, as smartphones flood established markets like the United States, vendors will increasingly turn to emerging markets like China, India and elsewhere to drive sales. However, average smartphone prices in those markets are well below the prices in more mature markets, which could cut into vendors' margins.
In other Samsung news, Gregory Lee was appointed president of Samsung Telecommunications America, the U.S. business of Samsung. Dale Sohn, the operation's previous president, will return to Korea as executive advisor to J.K. Shin, co-CEO and president of Samsung's IT & Mobile Communications business.
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