Samsung's margins shrink despite rising handset shipments

Samsung reported weak financial results for its handset division despite rising unit shipments, indicating that its margins are under pressure in the high-end segment from competitors such as Apple's (NASDAQ:AAPL) iPhone.

Click here for key stats from Samsung’s second quarter.The South Korean electronics giant said its telecommunications business--which includes both handsets and wireless network equipment--posted profit of $531.3 million, down 36 percent from the year-ago period. That division's operating margin fell to 7.2 percent, down from 10.8 percent in the year-ago quarter. The company's handset unit posted sales of $6.78 billion in the quarter, down 5 percent from the year-ago period.

Samsung shipped 63.8 million handsets in the quarter, up 22 percent from the 52.3 million it shipped in the year-ago period. However, the company said that its average selling price--which it did not disclose--fell due to intense pricing pressure and a less favorable product mix. The handset industry has had a mixed second quarter: While Motorola (NYSE:MOT) and Sony Ericsson have shined thanks to Android, Nokia (NYSE:NOK) and LG have taken hits. LG's handset division suffered its first loss in four years.  

Despite Samsung's weak margins, the company expects to see rising demand in the second half of the year. Samsung is aiming to triple its smartphone shipments this year and double its smartphone market share. The company scored a coup by getting all four Tier 1 U.S. carriers to ship variants of its flagship Galaxy S smartphone; sales started earlier this month. The company also will release its Android-powered tablet in the third quarter.

For more:
- see this release
- see these key Q2 stats for Samsung
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this FierceWireless Q2 earnings page

Related Articles:
Samsung unleashes slew of Galaxy S Android phones
Samsung plans on doubling smartphone market share
Samsung handset market share drops to 20%
AT&T lands latest Android phone, the Samsung Captivate
Samsung banks on LTE gadgets, Galaxy S

Suggested Articles

U.S.-based Parallel Wireless is expanding its open RAN push, announcing a new collaboration with Etisalat.

Loon wants to conduct a market trial in Puerto Rico using E-band spectrum.

Apple said it won’t meet its expected revenue forecasts for the current quarter because of impact from the coronavirus outbreak.