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WSJ: Samsung starts new year with $9 billion market value drop

Samsung's shares dropped 4.6% on Thursday, resulting in a market value drop of almost $9 billion.
January 2, 2014

Investors are apparently worried about Samsung’s future performance in the mobile market and its ability to compete, even though the company has a well-established position, both when it comes to market share and profits.

Samsung started the new year with a 4.6% stock price drop in South Korea, closing down at 1.309 million won (or $1,240), which shaved 9.3 trillion won (or $8.8 billion) in market capitalization, The Wall Street Journal reports. Overall, Samsung’s market value fell 9.9% in 2013.

Samsung will soon report its financial performance for the fourth quarter of 2013, with analysts expecting the company to post a profit of 9.65 trillion won on sales of 60.5 trillion won – profits would grow by 9.2% compared to the period in the previous year, but they wouldn’t match the 26% growth shown in the third quarter of 2013.

Samsung’s mobile division will be responsible for a large chunk of profits, at 6.2 trillion won for the fourth quarter – 14% growth compared to the year ago period, but 8% lower than in the third quarter.

Analysts are worried Samsung won’t be able to enjoy similar margins in the mobile business as it did so far, as the company will have to cut prices to match similar offers from competitors, affecting high-end smartphone sales in the process.

“The proportion of less premium smartphones appears to have increased within the portfolio, squeezing margins,” said Doh Hyun-woo, an analyst at Mirae Asset Securities, which lowered the estimate for Samsung’s fourth quarter operating profits by 6.2% to 9.3 trillion won.

The same exec cited other reasons for lowering estimates, including the strengthening of the Korean won but also the “unusually high bonus to Samsung employees.” Falling Samsung TV prices in China are apparently also a factor of concern for Samsung’s overall bottom line.

While analysts appear not to be confident with Samsung’s mobile future, just like they aren’t confident in Apple’s mobile business, Samsung is the only profitable Android device maker out there, and it’s sharing mobile profits with Apple at the expense of everyone else – Apple’s stock saw similar significant drops last year.