While the Korean based tech giant did report a 50% increase in second quarter net income to a record 7.77 trillion won ($7 billion), smartphone margins were down, mostly due to higher expenses associated with increased marketing of the Android flagship Samsung Galaxy S4.
The tech titan's mobile communications sector, which includes handsets and other mobile communication equipment, accounted for 66% of total operating profit. The sector's operating profit rose 54% year-over-year, but showed a slight decline in growth sequentially with a 52% increase from Q1. Margins in the mobile communications group fell to 17.7% from 19.8% in the first quarter.
Despite weaker sales of the Samsung Galaxy S4, Sammy is locked into some promotional decisions, like the $20 million deal it signed with Jay-Z. The company recently purchased 1 million digital copies of the rapper's new "Magna Carta Holy Grail" album and gave them away to 1 million Galaxy users three days before the album dropped. Investors aren't blind to the situation. Since the Samsung Galaxy S4 launched in April, Samsung's shares have dropped 12.8% wiping out $25 billion of the company's value.
There is still the Samsung Galaxy Note III for Samsung investors and fans to look forward to. The phablet is expected to have a 5.7 inchscreen and possibly include the new Samsung Exynos 5420 processor and 3GB of RAM. But just like the Samsung Galaxy S4 ran into increased competition this year from models like the HTC One and the Sony Xperia Z, the Galaxy Note III will have to battle the 6.4 inch Sony Xperia Z Ultra and the HTC One Max. The Sony model has already been introduced and will launch in Taiwan at the end of this month.