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While Samsung still made a ton of cash, its smartphone sales and earnings are down

Yesterday, we got a look at how Samsung is performing in the current global smartphone market. IDC’s numbers for Q3 showed us that Samsung’s Q2 2014 shipments fell by 3.9 percent year-over-year (YoY) while its market share for Q2 2014 dipped to 25.2 percent compared to 32.3 percent for the same period last year.
While Samsung’s numbers were down, the overall market saw sales of 295.3 million units for Q2 2014 while sales were up 23.1 percent YoY.
With this background information, we have a little bit of insight into Samsung’s Q2 earnings. As a whole, the company made $6.07 billion in net profit on total revenue of $50.86 billion. Operating profit came in at $6.98 billion, which represented a 15 percent decrease from Q1 2014. More importantly, it was a 25 percent lower than the same period last year ($9.27 billion).

Samsung’s mobile division brought in the most cash for the company, delivering sales of $27.60 billion and an operating profit of $4.29 billion. Those figures were down 12 percent and 31 percent respectively from the same period last year.
Despite what IDC has shown with its own data, Samsung blames its performance on slow global growth:
The second quarter was affected by several factors including the slow global sales of smartphones and tablets and escalating marketing expenditure to reduce inventory.
For those that are expecting Samsung to rebound in the immediate future, the company notes that the “second half of 2014 will remain a challenge” and that “profitability may suffer due to a heated race over price and product specifications.”
However, Samsung is looking to release new “premium mobile devices” and new “mid-to-low-end models” to better compete with mass-market mobile devices. The next big launch on tap for the company is the Galaxy Note 4 that will bring a QHD screen to the table.
The company also plans to launch a phone using “new materials” other than plastic according to The Wall Street Journal in the future, so whether the device will be the Galaxy Note 4 or the Galaxy Alpha remains to be seen.

Sources: Samsung [1], [2], The Wall Street Journal

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post smartphone era now?
By luv2liv on 7/31/2014 9:42:58 AM , Rating: 3
so now that phones are so powerful, people dont need to upgrade as often...
smart watch is where they will make money? i highly doubt it. then again i thought the ipad would fail too.

RE: post smartphone era now?
By degobah77 on 7/31/2014 9:56:03 AM , Rating: 3
This is my thought as well. Why companies think people need or want to upgrade every 3-6 months just because of a shiny new pixel is beyond me.

There are zero compelling reasons to keep forking over insane amounts of cash just to have the latest and greatest tech gadget that does exactly the same thing as the one before it. Most people I know choose a phone and stick with it until it dies.

RE: post smartphone era now?
By Brandon Hill on 7/31/2014 10:13:34 AM , Rating: 3
And this is why I've had my current phone for almost two years. I used to upgrade every year (because AT&T allowed me two before they started cracking down). But the improvements to smartphones have really slowed and I haven't seen any compelling reason to upgrade.

I'm getting a little bit of an itch to upgrade, but common sense is telling me that I don't really need a new phone.

RE: post smartphone era now?
By FITCamaro on 7/31/2014 2:31:58 PM , Rating: 2
Yeah I get a new phone every two years for free from my company. But for my wife, she doesn't need a new phone for a while after getting her a HTC One last Christmas. Granted we're sticking with Verizon and at the end of your contract, you can usually get a good new phone for free for re-upping. You don't get a discount or anything for going month to month off a contract so unless the terms change again and we don't like the new ones, we'll just get her a new phone that's "free".

RE: post smartphone era now?
By niva on 8/1/2014 1:18:57 PM , Rating: 2
I got my Samsung Galaxy Nexus shortly after it came out and I'm still using it. It's not the fastest phone now by any means, actually it's slow, but it gets the job done for what I need it to do. Sure I'd like LTE but the vast majority of the time I browse on the phone is at home where I'm connected to the wireless anyways. About 6 months later I got my wife one, but hers started having problems so I bought her a LG Nexus 5 shrtly after that phone came out.

The problem Samsung has is that they're not making pure google devices, I'll never buy anything but a Nexus phone after the experience I've had with the line. Overlays and special software are not for me as they delay access to the latest OS releases, patches and security fixes. The Samsung Galaxy phone was a good piece of hardware for it's time though.

RE: post smartphone era now?
By Reclaimer77 on 7/31/2014 12:01:06 PM , Rating: 1
Why companies think people need or want to upgrade every 3-6 months just because of a shiny new pixel is beyond me.

Why car companies keep coming out with new models every year is beyond me. My car is 5 years old and it's just fine, so nobody else should want a new one either!!


Sorry just maybe helping you see how short-sighted your viewpoint is.

This is a GIGANTIC market. Every day literally MILLIONS of people's contracts are up, and they're looking for new phones. Every day literally MILLIONS of first-time smartphone buyers have to choose which phone they want.

Seriously what the F is wrong with you? There's a massive market out there, and it's the job of smartphone OEM's to compete for that business. What are you even trying to say? That they shouldn't be making new models?

Most people I know choose a phone and stick with it until it dies.

And if most people you knew drove cars till they blew up, should that mean nobody should be making new cars?

Please try to see outside the little box that is your life.

RE: post smartphone era now?
By hughlle on 7/31/2014 12:39:10 PM , Rating: 2
I don't think you understand the argument ;)

It is not about not making new phones. It is about understanding that it has reached the point where there is no need to upgrade as often, and as such sales expectations shouldn't be so high. Certainly people will buy new phones, but at this point, as figures clearly show, a lot of people are not upgrading at the end of each contract, but holding onto their model with a reduced contract price until something is released that actually gives them a reason to fork out a good chunk of cash.

The figures rather speak for themselves surely? Samsung are no longer making phones with enough must-have features to convince people to upgrade to their new one.

RE: post smartphone era now?
By Reclaimer77 on 7/31/2014 12:49:41 PM , Rating: 2
We're talking about a 25% decrease in YTY. What you're talking about would be gradual, not overnight.

Sorry but there's a lot more going on here than just "phones be gooder enough"....

RE: post smartphone era now?
By Spuke on 7/31/2014 4:30:25 PM , Rating: 2
Seriously what the F is wrong with you?
LMAO! crack me up sometimes.

RE: post smartphone era now?
By w8gaming on 7/31/2014 7:27:14 PM , Rating: 2
Read the figures closely (in another article). It is indeed a gradual drop in sales volume. YTY change is -3.9%. It is the market share which has been reduced to 25%. Due to competitions are selling more Android phones.

RE: post smartphone era now?
By tonyswash on 7/31/2014 3:18:51 PM , Rating: 1
Interestingly Benedict Evans has just written a clever piece of data crunching analysis showing how short the replacement cycle of Android phones is.

Here is a take away quote from the article:

What should we make of this? These are (to repeat) approximate numbers, but it seems clear that Android phones remain in use for well below the 24m average for the market, and during the peak growth period the replacement rate was closer to one year. The chart below compares what a 24m replacement cycle would have looked like compared to Google's own numbers.

The cycle clearly seems to be lengthening, but it's not clear yet how much.

Meanwhile, we don't have comparable data for iPhones, but the fact that around a third of the active base is on the iPhone 4 or 4S does rather speak for itself: if anything the iPhone is on longer than 24 months, especially if you take 2nd hand into account (though quite a lot of that second-hand seems to be exported to emerging markets, complicating the picture).

This has some interesting ecosystem implications. It looks like the Android ecosystem has to sell significantly more phones than Apple to get the same number of active users. This is probably good for the OEMs (presuming the replacements are not people switching away from Android to iPhone), but less good for Google. Ironically, Apple might prefer it to be the other way around as well - it would probably prefer you buy a new phone every year. But this makes comparing market share problematic - it looks like a given number of iPhone unit sales might mean more customers than the same number of Android unit sales.

As for Samsung, it's just being squeezed, caught between the rapidly developing Chinese Android OEMs capturing sales and driving down margins at the lower end, and Samsung's failure to dislodge Apple at the premium end of the market. Plus of course Samsung cannot extract more revenue and profit from the non-hardware parts of the Android ecosystem because Google takes pretty much all of that.

RE: post smartphone era now?
By Reclaimer77 on 8/1/2014 9:13:26 AM , Rating: 2
Meanwhile, we don't have comparable data for iPhones


You don't see anything wrong with this? The article, which is once again another clearly pro-Apple "source" of yours, is basing the entire argument on a comparison between Android and the iPhone. And yet he's missing the ENTIRE data set for the iPhone!

I mean..hello?? It's impossible to make an objective informed decision in the absence of ANY data!

I know you have a problem when this approach is used to confirm Climate Change theory. You should accept no less when it comes to Apple.

RE: post smartphone era now?
By degobah77 on 8/1/2014 10:11:10 AM , Rating: 1
I'm not saying companies should stop making phones, just that they should stop expecting to keep selling at the same rate now that the whole planet has a goddamn phone. Most people don't need a new car every year. Most people don't need a new phone every 2 fuckin' weeks, either. So the point that you missed is this; why is anyone shocked that sales are down?!?!?

RE: post smartphone era now?
By hughlle on 7/31/2014 10:05:36 AM , Rating: 2
Exactly. In the past, features were missing, not up to par, and people had a good reason to upgrade their phones. things were constantly changing. Now phones happily do everything people need them to do, and there is no reason to upgrade. People upgraded because of cameras that could actually replace a cheap point and shoot, they are not upgrading because the phone can scroll by monitoring your eyes.

RE: post smartphone era now?
By retrospooty on 7/31/2014 10:19:36 AM , Rating: 2
Yup... It should plateau now.

RE: post smartphone era now?
By Spuke on 7/31/2014 11:17:51 AM , Rating: 2
Some of you guys are extremely difficult to please. Retro, didn't you just buy a G3?

RE: post smartphone era now?
By retrospooty on 7/31/2014 11:23:35 AM , Rating: 2
Yes I did. I am not sure what you mean?

I was just agreeing that in general, smartphone sales should start to plateau, meaning it cant keep growing at that rate forever. At some point the market is saturated.

RE: post smartphone era now?
By Spuke on 7/31/2014 4:33:38 PM , Rating: 1
Oh ok, I got confused again. I agree 100%.

RE: post smartphone era now?
By synapse46 on 7/31/2014 4:43:10 PM , Rating: 2
I'm still happy with my S3!

By valkator on 7/31/2014 9:06:56 AM , Rating: 2
I like how they highlight the note 4 to have a QHD display.

That really isn't a feature that anyone cares enough about that they will go get a new phone, or going to lead them to another record high sales type of phone.

The wow factor with smartphones is over. It isn't anywhere near as exciting as it was years ago.

By Flunk on 7/31/2014 10:39:32 AM , Rating: 2
You're right, until they make 8K my eyes bleed while I use my phone!

By Reclaimer77 on 7/31/14, Rating: -1
By valkator on 7/31/2014 11:53:45 AM , Rating: 3
I am pretty sure that I won't be proven wrong.

But thanks for playing.

By Reclaimer77 on 7/31/2014 11:55:36 AM , Rating: 2
You were wrong about the Note, Note 2, and Note 3. So yeah, pretty sure the Note 4 is going to sell enough units to justify it's existence.

Will it compete with the iPhone in sales? No, Note's never have. They weren't intended to.

By valkator on 7/31/2014 11:59:38 AM , Rating: 2
I never said anything about the previous notes. So, no idea what you are talking about. I currently have a note 3 which the screen is plenty nice.

I never said anything about justifying its existance. The phone will most likely sell well. I was saying it isn't going to be the big seller to boost their profits back to where they want them.

By Reclaimer77 on 7/31/2014 12:05:35 PM , Rating: 2
No sh*t Sherlock. When has the Note line EVER been a big seller to boost profits for Samsung?

You made some silly post criticizing Samsung for making QHD a feature in the Note 4. QHD might not be a big deal to you, but it's literally THE "next big thing" with premium smartphones.

LG was first with the G3, and like it or not, EVERY halo-phone being released from here on out will be expected to have QHD. Halo-phones sans QHD, will be instantly assumed to be inferior.

You can either get on board with that, or take a space taxi back to planet idiot.

By valkator on 7/31/2014 1:08:49 PM , Rating: 4
Again, you show your lack of intelligence. I said the QHD screen is not the feature that is going to boost their profits. They will profit well from this phone like they do with the note line. However, when we see Q4 results, samsung isn't going to see the boost in profits to turn around their gradual decline.

It is basically something that is keeping up with phones that already have had it. I think it is great that we are getting better technology, but to say that feature is going to be the highlight of why it will sell better than the last generation note is insane considering how saturated the market is right now on high end smartphones.

So, when released, it will be not that big of a deal. It is rediculous how stupid you answer back. You are such an idiot.

By FITCamaro on 7/31/2014 2:35:50 PM , Rating: 3
They went down because people are getting even more budget conscience and a bunch of cheap Chinese brand phones came into the mix. The Chinese are quickly becoming who will determine market trends. America is a pretty tapped out market. China is still roughly 800-900 million untapped customers. India is the same way.

By Reclaimer77 on 7/31/2014 2:41:31 PM , Rating: 2
What does intelligence have to do with you setting up false Straw Men to knock them down? NOBODY said the QHD on the Note 4 was going to "boost profits". Not even Samsung!

So, when released, it will be not that big of a deal.

That's your opinion. The whole point of a phablet is the gigantic screen. My opinion is that a large QHD screen IS a "big deal". And so will be the opinion of those buying it.

but to say that feature is going to be the highlight of why it will sell better than the last generation note is insane considering how saturated the market is right now on high end smartphones.

Actually the explosive growth we're seeing is from the budget mid's to low-end smartphones. The high end isn't really all that saturated.

But hey, I'm the one with the 'lack of intelligence', so troll on.

By valkator on 7/31/2014 3:27:18 PM , Rating: 2
You're going to tell me the point of a phablet when I own a note 3? Thanks for the lesson.

Also, you said earlier that I was going to be proven wrong about the QHD screen and how I believe it won't help boost their profits. So your "Nobody said" claim is wrong. You said in an earlier post.

Next, I like how you managed to bring up the iphone in this discussion. I could care less about the iphone. You must have made some assumption that I like iphones in your head.


People that are willing to fork out money for high end smartphones are the same people that currently have decent ones already (note 3, s5, lg g3, etc). It is not easy to just slap down a bunch of money for another small incremental upgrade with nearly the same features like some idiot iphone lover.

I look at my note 3, along with several of my co-workers that own one, then look at the possible specs of the note 4 and not one person thought "boy, I can't wait to have that note 4" like how it was when I had a note 2 or how it was when some of my co-workers that still had the original. The excitement and attitude changed.

People seem to be more content with what is out there now. Note 3 for example is a great snappy phone with a nice display and halfway-decent battery life. What would be a great feature is if the note 4 had nearly double the battery life of the note 3. Then they would really have something there.

By vortmax2 on 7/31/2014 10:48:10 AM , Rating: 2
...has begun!

Spin baby, spin!
By melgross on 7/31/2014 9:06:48 AM , Rating: 1
As usual, Samsung it trying to work the numbers, even though the numbers are public, and we can see their excuses are wrong.

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