First profit drop in three years for Samsung?

First profit drop in three years for Samsung?

Korean electronics giant Samsung has forecast a 10 % turnover drop and 35 % profit drop for its fourth quarter. This may result in its first full-year profit drop since 2011.

Better than its third quarter

Samsung has managed to limit the damage in its fourth quarter, after a considerable profit drop in its third quarter (-60 %). That is partly thanks to the weak Korean won currency compared to the American dollar and thanks to the moderate success of its Galaxy Note 4. Nevertheless, its numbers are not that positive: Samsung has forecast a 39.1 - 40.6 billion euro turnover, 10 % lower than what it managed in 2013's fourth quarter.

 

Profits have suffered even more as it dropped from 6.4 billion euro to 3.8 - 4.1 billion euro (-35 %). Its full-year numbers will be presented at the end of January, but it is highly likely that Samsung will have to concede its first profit drop in three years.

 

Mobile branch struggles

The explanation for the turnover and profit drop is clear: Samsung's smartphones and tablets face huge competition on both sides of the market. The newest iPhone is a threat in the higher echelons and on the lower end of the scale, cheaper brands like Xiaomi are gaining market share. In its third quarter alone, Samsung's mobile division had to deal with a 74 % profit drop. During its peak, the division represented 68 % of the group's profit, which has faded to 44 % in the third quarter.

 

Samsung hopes to turn the tide at its mobile division with 30 % fewer new smartphones and an increased focus on the development of its other divisions - like the "internet of things" and its television branch.

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