Samsung battered by sluggish stock, labor issues, sales ban and indifference on Galaxy S5 launch day

Samsung, the world's largest manufacturer of smartphones and mobile devices, today launched its flagship Android smartphone, the Galaxy S5, in 125 countries in Europe, Middle East, North America, Latin America, and most of Asia. The Tier 1 U.S. carriers are also launching the device today. But the launch coincides with significant declines in Samsung's stock price following profit warnings from the company, along with rising concerns about worker conditions in its Korea factories as well as a temporary ban on sales of its Galaxy S5 in its home market of South Korea.

samsung galaxy s5

Galaxy S5

Perhaps the most concerning aspect of Samsung's Galaxy S5 launch is the device's relatively tepid reception among reviewers. Although the gadget features a wide range of high-end specifications, some see the device as a relatively minor upgrade to last year's Galaxy S4.

"While the Galaxy S5 is an evolutionary product, there is not enough in there to make people upgrade from the 4," noted Frost & Sullivan ICT Consultant Lawrence Lundy. "It doesn't push the envelope in any real way; we are in a sort of stasis now when it comes to smartphone innovation."

Samsung's high-end Galaxy S5 lands in a global market where Chinese vendors are gaining increasing share via the sale of inexpensive smartphones that offer many of the same functions and specifications as their more expensive counterparts. And that's part of the reason that Samsung earlier this week warned that its overall operating profit will slip in the first quarter and its sales will be essentially flat year-over-year. Specifically, the company said it expects operating profit to have fallen to $7.98 billion for the first quarter, down 4.5 percent from $8.36 billion in the year-ago period, and its sales to come in at $50.3 billion, basically flat from the year-ago quarter.

That warning, combined with a drop in global technology stocks and changes in Korean currency, caused Samsung's shares to fall by 1.4 percent in trading today, noted the Wall Street Journal. The publication noted that Samsung's shares have fallen fully 2.7 percent since its profit warning.

In a separate but equally concerning report, Bloomberg Businessweek filed a lengthy look at the conditions in Samsung's manufacturing facilities in Korea; a growing number of workers are reporting cancer that some believe could be due to carcinogenic materials in the factories. According to the report, the issue is gaining steam in Korea, even generating a movie--"Empire of Shame"--documenting a battle between workers' families and Samsung.

Finally, Samsung is also facing a temporary ban on sales of its Galaxy S5 in South Korea. The ban stems from a South Korean government attempt to prevent excessive subsidies on devices by the country's carriers--SK Telecom and KT ran afoul of rules against excessive subsidies and as a result are being prevented from selling the Galaxy S5 for the next few weeks.

For more:
- see this Samsung post
- see these two WSJ articles
- see this Verge article
- see this Bloomberg Businessweek article

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