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Uh oh: Samsung issues first-ever preemptive warning for its scary Q1 earnings
- Samsung just posted its quarterly earnings guidance report ahead of its full report due sometime soon.
- The guidance report was preceded by a “warning” of sorts, an unprecedented move from Samsung.
- The guidance report shows the company in dire straits, hence the necessity of a preemptive warning.
Samsung, the world’s largest smartphone manufacturer, is expected soon to release its full earnings report for the first quarter of 2019. In an unprecedented move for the company, Samsung posted a preemptive “warning” to investors before the release of its earnings guidance report (via Reuters), which Samsung released today.
The warning ahead of the earnings guidance report was a sobering move for the company, as the report does indeed show that the company is going to miss revenue expectations and post a significant year-over-year drop in profit.
Usually, Samsung will release an earnings guidance report ahead of its full report so investors can get a head start on any necessary decision-making. This time around, Samsung posted a warning first, something we’ve never seen before from the company. Now that we have the earnings guidance report (which you can see here), we know why Samsung made this move.
According to the report, Samsung is poised to announce an operating profit of as much as 6.3 trillion Korean won (~$5.5 billion) for January through March of this year. That is a drastic drop from the same time period in 2018 when Samsung posted an operating profit of 15.64 trillion won (~$13.8 billion). That represents a very concerning 60 percent drop in profit.
There are multiple reasons for this significant slump. First is the overall downturn in the global smartphone market. Not only does this affect Samsung when it comes to its own devices, such as the just-released Samsung Galaxy S10, but also when it comes to devices from other companies which use Samsung parts (the iPhone, for example, features Samsung displays).
Another big reason for the slump is the plummeting price of chips, which is another cornerstone of Samsung’s business.
All in all, things are poised to only get worse for Samsung if the industry as a whole doesn’t turn around. This is one of the biggest reasons the company is pushing so hard for foldable devices: if it can create a new market in which its own products are a necessity (foldable displays, for example) then it can overcome this downturn. It’s becoming increasingly clear that the so-called “golden age” of smartphones is coming to a close and consumers will need something new to get excited about.
We’ll know more specifics about Samsung’s quarterly earnings when it releases its full report soon.