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Samsung reports another mediocre quarter, raising the stakes for the Galaxy S6
For the quarter ending March 31, Samsung reported a net profit of 4.63 trillion Korean won ($4.3 billion), which is a 39 percent drop compared to the same quarter last year. The result is worse than what analysts polled by WSJ and Bloomberg have estimated. This is the fourth straight quarter of declining net profit for Samsung.
But there’s some good news that suggests the worst has passed: operating profit increased from Q4 2014 by 13.1 percent to 5.9 billion won ($5.5 billion).
Samsung’s quarter was buoyed by the good performance of its component division, which makes memory modules and other chips, for Samsung and other customers. The semiconductor business rose 50 percent compared to Q1 2014 and 8.5 percent compared to Q4 2014.
The crucial mobile division didn’t do as well. Even if Samsung managed to ship 99 million handsets, out of which “over 80 percent” were smartphones, operating profit fell 57 percent year on year.
The silver lining is Samsung managed to sell more phones than last quarter (enough to put it back on the first place globally, according to Strategy Analytics) and increase its profit margin to 10.6 percent, compared to 7.5 percent. That’s because Samsung sold more mid-range devices and decreased marketing costs.
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For the next period, Samsung foresees strong sales for the Galaxy S6 and Galaxy S6 Edge, though the company expects the total amount of devices it sells to remain the same in Q2 2015. That’s because “increased competition in the middle- to low-end market and a possible decrease in demand due to the impact of foreign exchange rates in specific regions.” In other words, Samsung will likely cede some market share to rivals at the lower end, but high-end sales will make up for it.
Samsung is in an interesting place right now: after dominating the smartphone market in all ranges, the Korean giant is now focusing on the mid to upper ranges, with devices like the Galaxy A series and the Galaxy S6. Samsung can’t (or won’t) compete with priced-focused players like Xiaomi or Huawei, so a lot more is hanging on the success of the Galaxy S6. For now, the outlook for the Galaxy S6 is great, and Samsung said it expects record sales. But it remains to be seen how this strategy will turn out for Samsung in the long term.