Samsung looks to overhaul its smartphone strategy to get back on track

Earlier this month, Samsung forecast dire results for its Q3 2014 earnings report. Samsung stated that operating profit would fall by 60 percent year-over-year (YoY), and that revenue would also see a significant decline.
The official numbers are out, and they confirm Samsung’s initial guidance. Overall revenue fell by 19.7 percent, but more importantly, mobile revenue was down a substantial 34 percent. Samsung Electronics as a whole saw its Q3 operating profits fall by 60 percent to $3.8 billion. The biggest loser, however, was Samsung’s mobile division, which suffered a 74 percent profit drop from $5.7 billion to $1.65 billion.
The mobile shortfalls can partially be blamed on Samsung’s slipping position in the global smartphone market. Smartphone shipments fell 8 percent YoY to 78.1 million units, and it market share fell from 33 percent to 24 percent YoY.
In addition, Samsung’s new Galaxy Note 4 was released too late in the quarter to make any meaningful contributions to the company’s bottom line.

 Samsung Galaxy Note 4
“Our high-end smartphone sales result was somewhat weak,” said Kim Hyun-joon an executive for Samsung’s mobile division during an earnings conference call.
Samsung is facing increasing pressure from Chinese OEMs like Xiaomi and Huawei, which are releasing feature-packed smartphones with budget price tags. Samsung has found it hard to compete with these value-priced entries, and even Apple’s premium-priced iPhone 6/iPhone 6 Plus smartphones have embarrassed Samsung on its home turf.
Samsung’s solution to its smartphone slide is to completely overhaul its strategy to compete more on price (although we have to wonder if a pricing war will further erode the company’s profits), with Kim adding, “We will fundamentally reform our product portfolio, and significantly enhance our competitiveness for each price tier.”
Samsung has already taken steps to inject a little more style and substance into its smartphones with the Galaxy Alpha lineup, which has trickled into the design language of the Galaxy Note 4.

Sources: Samsung [PDF], The Financial Times

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