Samsung Electronics posted preliminary fourth-quarter profits that fell well short of analysts' expectations, providing more evidence that growth in the worldwide smartphone market is slowing substantially. And the manufacturer is hoping the emergence of the IoT can ease its financial woes.
The Korean manufacturer reported an operating profit of $5.1 billion during the quarter, falling short of the $5.5 billion average of analysts' estimates compiled by Bloomberg. The profit marks a 15 percent increase over the same quarter in 2014, far short of the 80 percent year-over-year increase in operating profit Samsung reported in the third quarter of 2015.
Samsung's strategy of expanding its focus to electronics components as well as smartphones paid dividends for much of 2015, but demand for those components has weakened recently. Meanwhile, the worldwide smartphone market continues to slow -- IDC has estimated the industry saw single-digit growth for the first time last year -- and Samsung has been particularly hard-hit, facing competition from Apple in the high end of the market and from a slew of fellow Android manufacturers of mid-range and low-end devices.
And, according to analysts, the company's efforts to kick-start revenues through mobile software and services have foundered as Samsung continues to struggle to overcome a mindset that focuses on hardware, where margins are often razor-thin.
In an effort to expand its business and generate revenues in a burgeoning space, Samsung is working with Microsoft to develop a variety of IoT devices running Windows 10. While the companies made no formal announcement, a Microsoft executive participated in Samsung's keynote speech this week at CES, demonstrating devices that might be found in a future connected home.
Samsung is also pursuing the IoT with Tizen, an OS that the company is increasingly using in its wearables.
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