Samsung Q4 2015 earnings shows tenuous recovery

Samsung Electronics has just posted its fourth quarter earnings guidance, which reveals some mixed fortunes for the technology giant. Between October and December, Samsung’s operating profit came in at around 6.1 trillion Korean won (USD$5.1 billion), up from 5.3 trillion won last year. This marks a notable 15 percent increase and suggests that profits are undergoing a small recovery. However, this amount falls short of analyst estimates. Many had expected Samsung to post a profit of around 6.6 trillion won.

To put this in perspective, Samsung’s quarterly revenue has remained virtually unchanged at 53.0 trillion Korean won against 52.7 trillion won in the same quarter last year. Samsung’s efforts to cut costs and improve profitability this year have clearly worked out, but the company does not appear to have been able to improve its sales position.

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Samsung’s declaration does not give a full breakdown of the performance of each of its business divisions, those will follow later this month. However, analysts are anticipating that smartphone sales have continued to feel the impact of lower cost Chinese competitors and a generally poor global economic outlook.

Instead, the company is expected to have missed analyst targets due to a stall in Samsung’s component and semiconductor businesses. Demand for flash memory may have been impacted by lower global demand for electronics, while Samsung’s display panel business has seen increasing competition from Chinese manufacturers and falling prices this year. These areas of Samsung’s business had been offsetting the company’s decline in smartphone revenue.

It isn’t just market analysts that are concerned about the tenuous recovery to Samsung’s operating profits, the company’s CEO recently warned that 2016 would be another tough year for the company. The electronics giant is preparing to face intensifying competition to its smartphone, TV and memory chip businesses this year. Interestingly, the company is looking to put more of an emphasis on using software to help differentiate its products from those of its rivals in 2016. Samsung has been making a big show of its services, such as Samsung Pay, at CES 2016.

A more detailed breakdown of Samsung’s Q4 2015 finances is expected later in the month.