Samsung’s fourth quarter earnings out, profits down 40%

by: Kris CarlonJanuary 28, 2016
1.2K

Samsung booth

Samsung has released its consolidated fourth quarter earnings for 2015 and they don’t paint a pretty picture. Samsung’s earnings for the final quarter of the year were far from good, with the South Korean giant reporting net profit of just 3.2 trillion Korean won ($2.7 billion), a massive 40% drop and well below earnings expectations.

samsung galaxy note 5 review aa (15 of 32)See also: Flashbacks and Forecasts: Samsung in 201620

Samsung’s quarterly revenue remained relatively unchanged at 53 trillion won ($44 billion) although operating profit increased to 6.14 trillion won ($5.1 billion). A “difficult business environment and slowing IT demand” were held accountable for the massive drop in profitability, but these were compounded by a weakening of Samsung’s semiconductor, memory and display divisions, which have been picking up the slack for a diminished mobile division in recent times.

Samsung-Electronics-FY-2015-Results.pdf 2016-01-28 16-33-49 Samsung

“Strong economic headwinds”

Samsung faced “strong economic headwinds, including a sharp fall in oil prices” during the quarter, producing yearly revenue of 200.65 trillion won ($167 billion) for the year with operating profit of 26.41 trillion won ($22 billion), although sales increased progressively throughout the year. The company is predicting tough times ahead for 2016, especially in its mobile division, which has been struggling to turn things around. Nevertheless, Samsung is still the number one smartphone seller in the world, according to IDC.

The IM division, which includes both Samsung Mobile and IT, saw a quarterly revenue of 25 trillion won ($21 billion) with operating profit of 2.23 trillion won ($1.85 billion). For comparison’s sake, that’s a 7.5% drop in revenue for the year compared to 2014 and a 30% drop in operating profit. Samsung reported a QoQ drop in smartphone shipments “due to a year-end inventory adjustment” with increased marketing spend affecting the bottom line.

2015 global sales IDC

“Softening demand and intensifying competition”

As for 2016, this is what Samsung had to say in a statement: “In the first quarter, although slowing demand for smartphones and tablets is forecast due to seasonality, and in spite of slowing shipments of Samsung smartphones, an enhanced product mix with the introduction of new line-ups, such as the Galaxy A (2016) series, is expected to help stabilize sales and profitability.”

But Samsung is expecting single-digit growth in both smartphone and tablet sales in 2016, citing “softening demand and intensifying competition”. The earnings statement is full of pledges of increased profitability and shipments throughout the year ahead, but with very little to back it up. Samsung Pay, wearables, software and tablets are all expected to increase to Samsung’s bottom line.

2015 global vendor list IDC

Samsung expects a tough year ahead

With excess chipset and memory supplies in the fourth quarter and diminished profitability for the display division as well, the areas Samsung has been relying on to compensate for a borderline mobile business are now also in trouble. Massive investment in a flexible OLED factory, new chipset customers like Qualcomm and new Internet of Things and Smart Home products are expected to soften the blow, but they can’t cover up the fact that Samsung is facing a very tough year.

Do you think Samsung will get out of this slump? What areas do you think it should focus on?

SAMSUNG'S BIG HITTERS:

  • Nallaikumaran

    Hello Apple authority. Not true. False news. In fact, Last six months Samsung mobile sales are not bad. Samsung – the great year 2013, the bad year 2014. Check out chart (From Theverge ) –

    • Hans Pedersen

      I agree they’re really doing their best to amplify negative words and question positive words. Gadget blog click baiting at its finest.

    • Aris Routis

      Not the first time AA is supporting Apple in their dire times after their crappy earning report that brought -7% drop in their share yesterday.

      • Scr-U-gle

        So crappy it was the most any company has made in a quarter, ever!

        You really need to keep yo flipping burgers instead of commenting on economics.

        • Aris Routis

          I missed this one. They made record earnings. However their own CEO predict for the first time decline in profits because pretty much iPhone is getting to be old news. And apple main income source is iPhone. It would be wise of you to give advice to those you know for I surely flip burgers on my free time but I do know fiscal clouds when I see them.

          • Scr-U-gle

            Nine years, you must really know your stuff. It’s just a cloud, that will continue for another nine years.

            I suggest you look at the latest fiscal report from Similarsung, it is one of the darkest clouds on the horizon.

            Their latest flop will be slashed in price I thin a month.

          • Aris Routis

            What is similar sung … never heard them.
            On a side note you could get a lesson on macroeconomics

          • Scr-U-gle

            Nine straight years, what’s so macro about that?

            You really are clutching at straws like the good little drone you are.

          • Aris Routis

            When the economy of a company is based on a product line and said company does nothing to change that they arw bound to deflate sooner or later. Bit feel free to grab pop corn and watch.

          • Scr-U-gle

            Can you try English please.

            Microsoft? Google? All rely on one product, anything else to say?

          • Aris Routis

            Google is a services company so no, they don’t rely on a product. Microsoft is monopolizing the desktop operating systems market and they are also turning their model into a services driven one (take a look at what they are doing with Office for instance).
            My English is pretty good, I would think tho that your knowledge of business models is pretty sure.
            Come back later, when you get some awareness.

          • Scr-U-gle

            Shows how little you know; Google is ad space selling company who’s only revenue comes from… That’s right ads sold. They earn nothing from any other revenue stream

            Microsoft is a software company, who earn their revenue from… You got it, selling software. They lose money outside of that stream.

            Both are desperately trying and failing to get into Apples business, software/hardware/retail/services.

            Apple Pay, followed by Androne pay, iOS followed by Androne, App Store followed by Google Play and whatever Littlesoftie store is called. Apple Stores followed by Windows stores and Googles barge that sank without a trace. The list of profit centres are pretty endless at Apple, the largest being iPhone.

            The business model being followed is Apples, from cloud based services as early as AppleLink to iCloud and every service imbetween.

            What are you 12? And only see what you want to see? You need to get out of googles walled garden, there are things going on that Google choose not to show

          • Aris Routis

            Apple pay is coming to follow google wallet and samsung wallet before that which was the first payment system in cooperation with Mastercard. Nor only that but apple pay is proven to be half measure in comparison to samsung pay since the latter can be used for NC and magnetic stripe transactions.
            Google is a services company and data harvesting is just one of their services. As for Microsoft they are rapidly changing into services as well. Office 365 anyone ?

            Do not lay judgement onto people you know nothing about. Instead try to learn something bout what you mean to talk bout.

          • Aris Routis

            I don’t really say this often, but in your case I will make an exception. Your answer really does not qualify a serious answer.

    • Luka Bulatović

      The funniest thing here if that’s true is that Android Authority is painting a fake picture, yet iVerge got something Samsung related right.

      • Nallaikumaran

        These news is a copy news. Android Authority copycat from apple news site. And wrong information.

  • RiTCHiE

    Dont you find it funny? S6 best selling galaxy phone but down 40% in sales? Thats crapsung magic 1 on 1 right here! But samsung lost it ways few yeats back so only them marketing sheeps keep buying their weak products.

    • Sebastian Bartlett

      Actually sales are up over this quarter and the year total. Don’t get profit and sales mixed up

    • it’s me tim-cock.

      You sound like a complete buffoon. Go sit your ass down somewhere in a corner. You’re on time out little girl.

  • Aweso

    Android Central reports the opposite…increased profit compared to last year.

    • Sebastian Bartlett

      Depends whether you look at Operating profit or net profit

  • Samsung just doesn’t get it. I have a simple advice that can make them much more profitable tomorrow: slim down your product line. Why in Heaven’s name do you offer so many different smartphones? It’s a complete joke. The result is – among other things – that software updates take forever to roll out. But smartphones aren’t just about hardware. It’s also about software. And when it takes them four months until now to roll out Marshmallow to the S6 series (and it is still not out yet) – then that tells you that their model doesn’t work.

    • Sebastian Bartlett

      Somehow they actually did decrease new phone model by about 30% but I agree along way to go.

      • If Apple had reduced their current line up with 30% they would have two models left. Just saying. :) Samsung, make a note of this…!

    • SamsaraGuru

      Samsung seems hellbent on not listening to consumers and instead is stamping out iPhone like clones with sealed batteries etc – all sexy and they know it.

      They have thrown away the identity of the Note series, which was at one time clearly differentiated as “the” phone to beat when it came to innovation; an object of wanton, unbridled desire on the part of power users.

      Apparently they have little interest in being a leader, if they did they would hire someone who actually knows how to lead.

  • Sebastian Bartlett

    Yet they still managed to increase phones sales and extend lead over Apple in quarter 4. Also operating profit and revenue was up. More of a mixed bag than you are making out

    • Mike Bastable

      Splitting hairs…these results are a disaster.

      • Sebastian Bartlett

        Not real, a disaster would be a loss or huge drops on sales which hasn’t happened

        • Mike Bastable

          A company needs to make money dude

          • Sebastian Bartlett

            And it’s still made a laot of money dude

          • Mike Bastable

            You kinda miss the point a little (probably on purpose…) Samsung spends a shit load of money on development and on advertising. To support future innovation they NEED to generate profit. Sensible profits in proportion to expenditure (opposite to profits earned supplying parts for the iPhone, for example). The recent trend shows a worrying decrease in profits DESPITE good products and decent sales. This malaise is affecting most Android OEMS, and IT IS worrying to see Samsung being so badly affected. The huge piles of money @ Apple underlines that decent sales CAN go hand in hand with profitability, Samsung needs to acheive this to succeed. The current figures are a disaster and WILL affect future investments (already we have seen 2 previously expected prime handsets be cancelled), lack of profits force them to consolidate costs into a few handsets. a 40% drop on any companies profits IS a disaster.
            I hope things turn around but thing will continue to look bleak as long as China OEMs and others sell at basically cost price to gain market traction. By keeping products premium and by running a lean efficient company Samsung might be able to turn things around, but the fact remains that their successes ARE NOT generating enough cash. Simple.

        • Scr-U-gle

          You don’t really get it, the worlds economy is based on an inflationary model, unless a company shows growth in profits, which Sammy hasn’t managed for coming up to four straight years, you are going down the drain.

          Alibaba profits were up 22%, share price has dropped due to weak outlook.

          Apple made 10x the profits of Sammy last quarter, so I don’t see how they are ‘extending a lead over Apple’.

          • Sebastian Bartlett

            Of course I get it, Amazon barely ever makes a profit yet it is loved by the stock markets. Its all about future potential and since samsung still makes way more oh yeah about 10x the profit of every other smartphone manufacturer other than Apple and its managed to maintain revenue and shipments and it is still making a lot of profitits clearly still doing well. Its lead over Apple was purely in shipments term so yeah in that regards it is in the 4th quarter.

    • Diego

      You do know that shipments don’t equal sales, right?

      • Aris Routis

        Shipments = orders that are placed by whoever places them. Samsung is paid for the shipments.

        Samsung cares only for shipments, just like those who place the shipments only care to sell them.

        So in the grand scheme of things, shipments = sales.

        • Diego

          Then why are they losing money?

          • They aren’t losing money, they just didnt make as much profit

          • Aris Routis

            Do you think only shipments are enough to turn things around ?

        • Scr-U-gle

          They are SOR, Sale Or Returns into stores.

          This means they get the junk back if the store can’t sell them.

          If they were doing as well as you claim, why have they had to sack the board, sack the CEO twice and sack the design team?

          Sounds like you don’t really understand economics of the situation.

  • Diego

    If samsung doesn’t get orders for the a10, its going to be tough.

  • Say What??

    I always bought Samsung phones in the past. The reasons why I don’t anymore are, A) TouchWiz. I just do not like the feel and heaviness of TouchWiz. Everything about it turns me off. Maybe it’s from using it for so many years but I can’t stand it now. It doesn’t lag at first but after some time it starts to run like crap. A B) Battery life. They could put 4000mah batteries into their phones if they wanted to but they choose not to. C) Lack of larger phablets. For me I like a screen size anywhere from 6-6.3 inches. I don’t have any options in that category here. Samsung needs to do what Huawei is doing and offer different sizes and put in larger batteries. I don’t want my phone as thin as a credit card if the battery is going to be tiny.

    • Happy

      Mate 8 is your phone – your size of screen and battery and no touchwiz…

      • Say What??

        I know, I own a Mate 8 currently. The battery, it just never quits! :)

    • khalimany

      its all in the optimisations buddy boy. you can put in an extremely large battery in a phone but if not optimised properly, it will drain quickly. for instance, take the lg g4 and the g3. both had 3000 mah batteries but they still have horrible battery life compared to phones with similar sized batteries. the huawei mate 8 which youre all quick to praise has a 4000mah battery but it still gets beaten by the s6 active in battery life which has a 3500mah battery and more power hungry internals (QHD screen for instance). i currently have the galaxy s6 and its been getting a bad rep for battery life since it launched but it still has better battery life than phones with higher capacities (G4 and the M9) and if you just tinker with the settings a bit, you can get over 5hrs SOT.

      So all in all, im for battery optimisations coz bigger aint better and id much rather companies stuff small sized batteries, even 1500mah and the cell is so optimised it can last for two days instead of stuffing a 4000mah battery that can last the same day.

      also, EMUI on the mate 8 is among the worst skins on top of android. touchwiz is miles better but feel free to diagree

      • Say What??

        Huawei optimized their new Emui 4.0 in the Mate 8 and also put in a 4,000mah battery. The new Kirin chip is built off a 16nm process so it’s economical. You have no idea how long the battery lasts! Samsung could optimize and optimize but until they increase the battery size, the optimizations will only make a slight difference in each release of series of phone. I happen to like EMUI as it’s a very light skin and feels as fast as stock Android but that’s just an opinion. What I have personally experienced in every Samsung phone I’ve had was some log to a certain degree and I haven’t had that with EMUI. Imagine Samsung put a 4,000mah battery in the Note 4 instead of a 3,000mah? It would probably last as long as the Mate 8’s so bigger is definitely better in today’s phone world.

        • Juschan

          Emui is a very light skin? it hastn’t got anything to do with stovk android does it?

  • khalimany

    people here are acting as if samsung is to blame for the decreased profits but what they dont understand and what the article clearly states is that competition has gotten stiff which means the consumer now has more options to choose from which is a good thing. no one company can entirely make an amazing product that will cater to every consumer’s needs and this is why this trend will continue. in the past, if you wanted a really good smartphone, your choices were limited to apple,samsung,lg,htc,sony and motorola and a few other manfacturers i havent mentioned, but nowadays there are so many oems to choose from its mind boggling and the consumer now has the option of choosing something that precisely caters to his/her needs e.g if you need an inexpensive phone with a fingerprint sensor, youre covered by the k4 note or the redmi note 3 and if you need a phone that is still inexpensive and well suited to photography then you can get the asus zenfone zoom or if you need front facing dual speakers on the cheap you have the alcatel idol 3.
    so long story short, samsung’s profits are indeed hurt but they’re not going anywhere soon

  • Camilla/קמילה

    The price of removing features,eat what you cook samasung.