Samsung posted its first quarterly profit decline in two years, reports Bloomberg. The Korean company’s financials were hit hard by a special employee bonus and slowing handset sales.
Samsung does not announce the number of handsets it sold in the quarter, leaving that figure in the hands of analysts. A report from Daewoo Securities estimates Samsung sold 9 million Galaxy S4 handsets in the quarter. Not only are sales of its flagship handset slowing, Samsung also is being squeezed by low-cost handsets being offered by Lenovo and Huawei. Though growing in numbers, sales of phones in the low-end market won’t bring in significant revenue as profit margins on these inexpensive handsets are slim.
“Earnings will remain stagnant this year as the explosive growth of the past two to three years seems to have ended,” said Lee Sun Tae, a Seoul-based analyst at NH Investment & Securities Co. “Although the lower-end smartphone market will continue to grow, the scale of profit from that segment doesn’t compare to the high-end market so the growth seems limited.”The drop off in handset sales also effected the company’s Display unit, which saw its operating profit fall 90 percent. Slowing sales of the Galaxy S4 resulted in excess inventory, while a decrease in television set sales affected TV screen shipments.
Samsung is increasingly facing pressure from Apple, especially in emerging markets like China. Samsung is a top seller in China, but its position is being threatened by the launch of the iPhone on China Mobile, the world’s largest carrier.
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