Links on Android Authority may earn us a commission. Learn more.
Samsung's third quarter profits forecast to hit new low
Following a string of poor quarterly earnings reports this year, Samsung might receive some respite come the end of the year, according to industry analysts. But not before posting another questionable quarter for July through to September.
Analysts are forecasting that Samsung will post poor earnings for the third quarter of this year come October 7th, with lacklustre smartphone sales again to blame for most of the company’s problems. Forecasts are predicting Samsung’s third quarter operating profit to slip 45 percent year-on-year, down to 5.6 trillion won ($5.28 billion) compared with a record 10.2 trillion won a year earlier. If true, this would result in an earnings call back in line with 2011 performance levels.
Some are even predicting that the days of bumper smartphone profits for Samsung may be over, and that this period of poor sales is actually a correction towards more reasonable and stable sales levels, in light of the growing competition from smaller Chinese manufacturers. However, this view is seemingly at odds with Samsung President D.J. Lee, who last week called the lull in smartphone performance simply “temporary”. Galaxy Note 4 sales are sure to act as a temporary boost come the end of the year, but I am less convinced about a long-term turnaround.
Instead, Samsung’s other technological ventures may have to increase revenue if Samsung ever wants to see a return to last year’s profit levels. Fortunately, Samsung’s semiconductor business is expecting a boost to profitability over the coming months, which could help see the company’s bottom line recover a little come the end of the year.
“What’s expected now is for the company to hit bottom and gradually recover, but we have now seen smartphone-related earnings peak,” – Korea Investment Trust Management fund manager Baik Jae-yer
Samsung is already producing memory chips and SoCs for various smartphones, and is also set to profit from demand for the new iPhones, as it provides 30 percent of Apple’s 20nm A8 chips. Furthermore, Samsung’s 14nm manufacturing process is expected to start up towards the end of the year, which will see high demand from Apple, Qualcomm, and AMD.
Despite all the negativity surrounding Samsung’s recent earnings, the company is not facing quite the same financial or market share problems as Nokia, HTC, or Sony. Perhaps most importantly, the company is still profitable, and is able to offset a decline in its smartphone sales with revenues from its other operations. While the longer term prospects of the premium smartphone market remain to be seen, Samsung has plenty of time to figure out its next move.