Samsung Electronics Co is headed for its first earnings drop for a year since 2011, after revealing its profit for the quarter July through September would be its lowest in over three years and that prospects for the short-term were uncertain for smartphones.
The world leader in smartphones sales has seen its market share globally decline in yearly terms for the past two quarters. Its smartphones are being outclassed by the iPhones of Apple in the high-end segment and Lenovo and other rivals such as Xiaomi are undercutting them in the low end segment.
Nevertheless, shares at Samsung had increased 1.1% by late Monday evening, reflecting the expectations that the profits in the company might have bottomed out and would increased again with the launching of less expensive models of smartphones in the upcoming months.
That would mark the electronics behemoth’s weakest profit for a quarter since the second three months in 2011 and the fourth straight quarter of declines in earnings compared to the same quarter the previous year.
Samsung has said that even though uncertainty has persisted in the mobile handset business, which accounted for close to 70% of its operating profit for 2013, it is cautiously expecting higher shipments of its new smartphones and a strong demand seasonally for its television products.
Many investors and analysts believed Samsung’s best days are behind them in the mobile division, as it would need to sacrifice its margins to maintain cheaper handset than Chinese made models that are currently grabbing market share. Even though the new products like its Galaxy Note 4 are going to help move profits up during the last quarter of 2014.
The smartphone segments operating margin dropped substantially during the third quarter because of higher spending in marketing and a sharply lower selling price average, as the proportion of shipments for devices in the high end dropped and the prices for its older models fell, said Samsung.
