Strong Competition Weighs Down Samsung’s Results (LON:BC94)

Samsung Electronics’ quarterly report has increased worries among investors about the company’s ability to keep growing in a market full of stiff competition. Samsung reported that its operating profit dropped 24.6 percent to 7.2 trillion won, or $7 billion, from the previous year for the quarter ended in June. Net profit was7.77 trillion won in the second quarter of last year, but dropped to 6.25 trillion won this year.

The profit results reported were the worst quarterly profits reported in two years for the company and the third straight quarter of profit decline. Samsung did not change its interim dividend, keeping it the same as last year. In the second quarter, Samsung’s share of the global smartphone market decreased to 25.2 percent from 32.3 percent in the same quarter last year.

Samsung was downbeat about its prospects for the second half of the year. Samsung also announced that it expected a decline in average sale price for its mobile products in the April-to-June period, due to the increase of strong competition in the industry. In May, the Apple iPhone 5s outsold the Galaxy S5 smartphone by a considerable amount.

The mobile division saw its profit decrease from 6.28 trillion won a year ago to 4.42 trillion won in the latest quarter. If the current management of Samsung’s mobile division cannot turn around the slide, it could lead to a reshuffling in the ranks. Samsung’s next Galaxy Note handset is projected to be released in September.

On a brighter note, Samsung’s chip division reported a profit of 1.86 trillion won. Samsung has also announced plans for the upcoming release of a new premium smartphone, which has a new design and will be made from a different material than many of the other phones.