Slow Samsung Galaxy S IV Sales, Advertising Expenses Trigger Earnings Miss
July 5, 2013 2:41 PM
Is smartphone market reaching saturation?
Samsung Electronics Comp., Ltd. (
)) must know a thing or two now about how its archrival Apple, Inc. (
) has been feeling. Apple's stock recently
slipped back under $400
, in the midst of
a stall in unit sales
. Overall Apple's shares remain down over 40 percent from their peak of $705 USD last September.
I. Profit Miss, Unit Sales Slowdown Hit Samsung Shares Hard
But the situation for Samsung isn't looking much better. Samsung missed on profit expectations, according to a forecast of sales projections for the second calendar quarter of 2013 late this week. Profit still set a record at 9.5T won ($8.3B USD), but that's less than the 10.2T won ($8.9B USD) 43 analysts polled by Thomson Reuters I/B/E/S hoped for, on average
Samsung remains the
king of unit sales
, but its profit margins and flagship smartphone sales weren't as strong as analysts were hoping for.
The misses drove Samsung into a nearly 4 percent drop in share prices amid an early Friday selloff. That's on top of a 13 percent drop in June following analyst downgrades.
, in Samsung's home country of South Korea,
[Korean] that sales of Samsung's Galaxy S IV have hit 20 million. That may sound impressive, but it shows a definite slowing for a phone that was already off to a more sluggish start then some expected.
5 million iPhone 5s
in 3 days, but it took Samsung
four weeks to reach 10 million sales
. Granted, the situation was a bit different -- the Galaxy S IV had perhaps more in common with the iPhone 4S, in that it was viewed by some fans as a disappointingly modest step forward, where as the
Galaxy S III
and iPhone 5 were viewed as larger leaps. It should be noted that it did take the Galaxy S III
to reach 10 million sales, but that number is slightly misleading, given its slower global rollout.
Sales of the Samsung GS IV, recently hit 20 million units globally. [Image Source: Yonhap]
It has taken Samsung nearly two months to move another 10 million units, marking nearly a 50 percent slowdown in monthly sales. Overall sources expect Samsung to move 22 million smartphones in Q2 2013.
One crucial problem analysts believe face both Apple and Samsung is a slowdown of global smartphone sales growth.
New York Times
Wall Street Journal
all warned of a growing market "saturation" on Friday.
II. Advertising Budget, Smartphone Profit Reliance Are Two Key Issues
And while that's certainly part of the issues surrounding Samsung, there's more too the investor concern than mere slowing sales, too.
In 2012 Samsung spent an estimated $4.3B USD globally
on advertising its smartphone product
-- the most of any company [
], and four times the marketing spending of Apple. The marketing is working, to an extent, but some analysts are concerned Samsung is overspending and getting diminishing returns on its investment.
HMC Investment Securities Comp., Ltd. (
) analyst Nho Geun-Chang
, "I think Samsung spent more on marketing expenses than expected because of the launch of Galaxy S4 smartphone, which led the company's results to miss the market consensus."
Some fear Samsung is spending too much on advertising.
Also concerning is Samsung's overdependence on its smartphone unit for profit. Given the relative lacking profitability of Samsung's other units -- which include the mildly profitable semiconductor unit, along with other less profitable units such as appliances, televisions, and automotive -- Samsung received 74 percent of its profit from mobile phones. That's more even than Apple, who receives 65 percent of its gross profit from the iPhone.
Again, there's more to this comparison than meets the eye -- Apple does have a much larger tablet sales volume driving much of its remaining profit, and Samsung still has a lot of room to grow in that market, where it's doing relatively well. But the dependence on smartphones is certainly something to keep an eye on at Samsung -- and arguably at both companies -- as it leaves it (/them) vulnerable.
Jeff Kim, an analyst at Hyundai Securities Comp., Ltd. (
, "One of the biggest risks for Samsung Electronics going forward is that 70 percent of total operating profit comes from mobile business. Diversification is key. Samsung needs to engage in active business transition until end-2014."
Some fear Samsung is relying too much on smartphones for profit.
Other analysts view this as more of a temporary situation, but remain concerned. Jung Sang-jin, a fund manager at Samsung shareholder Dongbu Corp.'s (
) subsidiary Dongbu Asset Management, comments, "Samsung's got diversified businesses. When one business lags, it's got others outperforming and propping up the overall profit. 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."
Mr. Jung's biggest concern is that Samsung's new smartphones lack a "wow" factor. He comments, "Is Samsung's smartphone story now over? Not quite yet. It's growth is indeed slowing due largely to disappointing sales of the S4. 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."
III. Tough Competition, but Promising Products
Will Samsung bounce back?
It's hard to say. The company did release a trio of higher margin Galaxy S IV variants, each with slightly cut down hardware, but unique features. One is the only smartphone with an optical zoom (the
Galaxy S IV Zoom
), another packs a rugged water-proof display (the
Galaxy S IV Active
), while a third has a smaller 4.3-inch form factor (the
Galaxy S IV Mini
). If these sell well, it should drive up profit.
The Galaxy S IV Zoom
But the impending threat of the
looms on the horizon. And HTC Corp.'s (
-- which received
better reviews than the Galaxy S IV
, on average -- also remains
a surprisingly feisty challenger
. Then there's the Chinese -- Huawei Technologies Comp. (
) with its upcoming
The Lenovo Group
, Ltd. (
) with its Padfone/Fone Pad jumbo smartphones, and ZTE Corp. (
) with its Grand S, which launched earlier this year. Lastly, there are wild cards like the recovering Nokia Oyj. (
) who is turning heads with
the Lumia 1020
-- which packs
perhaps the best camera
in the smartphone industry.
The HTC One
In short, Samsung remains king of the smartphone market in unit sales, and near Apple at the top in terms of profit, but threats from both within and without are shaking up share prices, amid its slowing growth.
"We don't know how to make a $500 computer that's not a piece of junk." -- Apple CEO Steve Jobs
More Images of Super-Camera Endowed Nokia Lumia 1020 Leak
July 4, 2013, 10:24 AM
Huawei Snags Former Nokia China President
July 2, 2013, 5:44 PM
Apple Stock Dips to $400 as iPhone Inventory Climbs
June 25, 2013, 9:00 AM
Report: Apple to Release Larger iPhone Screens, Cheaper iPhone for $99
June 13, 2013, 9:41 AM
Samsung Unveils Galaxy S4 Zoom Smartphone with 10x Optical Zoom
June 12, 2013, 12:24 PM
Meizu Smartphone - Now Available in US
December 9, 2016, 5:00 AM
3 Budget LED TVs
December 7, 2016, 5:00 AM
How is the BlackBerry DTEK50 Doing Today?
December 6, 2016, 1:00 PM
Best Secure Android Mobile Browsers:
December 5, 2016, 7:24 PM
Latest News, this is how the Moto X (2017) might look
December 3, 2016, 9:02 AM
Fake Apple Chargers Fail Safety Tests
December 2, 2016, 5:00 AM
Most Popular Articles
What Can You Do with Your New Echo Dot?
December 3, 2016, 5:00 AM
Google has developed Deep Learning Algorithm to detect Diabetic Eye Disease
December 4, 2016, 5:00 AM
Microsoft Surface – Which Surface is Right for You?
December 2, 2016, 5:00 AM
The iPlugmate is an Excellent iPhone Flash Drive at a Great Price. (Deal Expires in 3 Days)
November 23, 2016, 1:00 AM
Foscam R2 Home Security Camera System – High Quality High FHD Security Video Footage with No Monthly Fees
December 1, 2016, 2:00 AM
Latest Blog Posts
Dec 9, 2016, 5:00 AM
Latest Tech News
Dec 8, 2016, 5:11 AM
In The News
Dec 7, 2016, 5:00 AM
e Guide: Mobile Security for 2017
Dec 6, 2016, 5:00 AM
Apple Car is Not Dead
Dec 5, 2016, 1:00 AM
Dec 4, 2016, 5:00 AM
Dec 3, 2016, 5:00 AM
Dec 2, 2016, 5:00 AM
Surface Ergonomic Keyboard
Dec 1, 2016, 3:01 AM
Chapeconense plane crash: Football rallies around Brazilian Team
Nov 30, 2016, 1:00 AM
How to Extends Your iPhone’s Battery Life
Nov 29, 2016, 12:49 AM
Nov 28, 2016, 1:12 AM
News: Fidel Castro
Nov 27, 2016, 5:00 AM
Nov 26, 2016, 5:00 AM
Changes in Social status affect the way genes turn on and off within immune cells.
Nov 25, 2016, 5:12 AM
Austrian far–right hopeful Hofer may back EU vote.
Nov 24, 2016, 4:00 AM
Final Fantasy XV Leaked Before Nov 29 Launch Date
Nov 23, 2016, 1:00 AM
Nov 22, 2016, 2:26 AM
Nov 21, 2016, 1:00 AM
HTC Makes Big Moves in China
Nov 20, 2016, 2:00 AM
More Blog Posts
Copyright 2016 DailyTech LLC. -
Terms, Conditions & Privacy Information