Saturday 16 December 2017

Samsung fails to hit earnings target as smartphone sales growth wanes

Miyoung Kim

Samsung missed already modest expectations for its quarterly earnings guidance yesterday, deepening worries that its smartphone business may have peaked, as growth in sales of its blockbuster Galaxy phones begins to wane and new rivals emerge to eat away at its market share.

The Galaxy S, powered by Google's free Android platform, propelled the South Korean firm into the top rank of smartphone makers in 2012, overtaking Apple.

Now investors fear Samsung may also follow in the footsteps of Apple and other once-mighty players that are struggling with shrinking margins, in an industry where companies live and die by their ability to stay ahead of the innovation curve.

EXCITING

"Is Samsung's smartphone story now over? Not quite yet. Its growth is indeed slowing due largely to disappointing sales of the S4," said Jung Sang-jin, a fund manager at Dongbu Asset Management, which owns Samsung shares.

"Yet I think Samsung has some exciting stuff up its sleeves. The problem is no one is sure whether these products can really wow investors and consumers."

The disappointing earnings estimate by Samsung, which has had a track record of beating even the most bullish forecasts, sent its shares down more than 3pc yesterday.

They have dropped 17pc since early June, hit by a series of brokerage downgrades.

The fall in the share price equates to a drop in market value of 39 trillion won (€25.7bn) or worth the combined market capitalisation of Sony and LG Electronics.

"One of the biggest risks for Samsung Electronics going forward is that 70pc of total operating profit comes from mobile business. Diversification is key," said Jeff Kim, an analyst at Hyundai Securities.

"Samsung's got diversified businesses. When one business lags, it's got others outperforming and propping up the overall profit," Mr Jung said.

"The component business is widely expected to pick up the slack in the second half when smartphones slow, but now worries are also mounting that the component business' recovery could be short-lived."

Irish Independent

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