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Samsung expects first profit decline in more than two years

Posted: , posted by Luis D.

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Samsung expects first profit decline in more than two years
Samsung's estimates for the last quarter of 2013, ahead of its upcoming full earnings report, show that even the strongest animal in the jungle must battle to survive. According to the data, Sammy's operating profit has declined for the first time in more than two years, having fallen between 3.8% to 8.4% from Q4 2012. This will result in an operating profit of $7.6 billion to $8 billion on sales of $54.5 billion to $56.4 billion for the fourth quarter of 2013.

Although Samsung sales and earns in a quarter more than some of its top-competitors make in total revenue, apparently this is not enough to please analysts and shareholders. On average, analysts expected Samsung to deliver $8.31 billion operating profit on sales of $56.8 billion. Samsung's own expectation are a little below theirs, and although the company's estimate seems like a slight dip in in its financial well-being, Samsung's investors remain concerned as its market value recently dropped as much as $8 billion.

The most likely culprit is a slowdown of smartphone sales in what is becoming an increasingly saturated and aggressive market. Mobile devices are very important for the company, as they have accounted for more than half of its profits over the past two years. Another significant factor is the strengthening of the Korean won against the US dollar, which makes Samsung's products more costly to produce. Third, Sammy's marketing spending reaches new galactic proportions each year, with 2013's marketing and advertising budget coming in higher than Iceland's GDP. Finally, unusually high bonus payments for Samsung employees may have contributed to the situation, too.

Although Samsung's spearheaded train might be slowing down from the analysts' perspective, it won't be stopped anytime soon. At CES 2014, only hours ago, the company revealed four new high-performance tablets and a next-generation Smart Home platform, and is set to continue introducing many more new devices across the year. However, Samsung needs to kick back and rethink its plans, as its strategy of dominating the market by sheer product and marketing force has began to backfire.

source: Wall Street Journal, more via Engadget

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