In an announcement that is sure to cause at least some concern to shareholders, Samsung has announced that it expects its Q2 2015 profits to be down four percent on the same period last year. Despite launching a strong portfolio of smartphones during the period, it would seem that Korean based Samsung has misread the potential demand for the devices and admits that sales of the Galaxy S6 have failed to live up to expectations in a competitive marketplace resulting in a profit drop for the seventh consecutive year.
As part of the announcement, Samsung has estimated that its operating profit for the period of April-June of this year will fall from $6.26 billion from the same period of 2014 to $6.12 billion for this year’s Q2 period. The numbers are of course estimated at this time but would reflect a concerning four percent slip in profits and provide Samsung with cause to try and consider why sales of its powerful smartphones are faltering in a market that once couldn’t get enough of the company’s Android powered flagships.
What will actually likely be more concerning for Samsung is that these estimated figures are the first time that sales of the Galaxy S6 and S6 Edge have been taken into consideration as part of its accounts and financial reporting. The launch of the two powerful smartphones was seen internally as a potential financial lifeline, with executives hoping that the two new flagship devices would see a turnaround in fortunes after consumer disappointment with the less-than-impressive Galaxy S5 that was introduced last year. This doesn’t seem to have worked out entirely according to plan.
It doesn’t all appear to be doom and gloom however. Sales of the Galaxy S6 and S6 Edge have been strong enough so far to pull Samsung back from the 30-percent profit drop it had been experiencing. Industry experts are also suggesting that expectations placed on the Galaxy S6 range of devices were extremely exaggerated. Yoo Eui-hyung, who makes a living as a market analyst, provided an insight to Bloomberg:
Market expectations for S6 sales were way too excessive. Analysts are revising down this year’s shipment forecasts for the S6 because demand for the Edge model is exceeding supply, while the other version isn’t selling well given its limited differences with the iPhone 6.
Samsung’s fall from grace is highly attributed to the fact that Apple decided to release larger iPhones last year, taking away a significant amount of users from its roster. Also, Chinese makers with cheaper Android alternatives are hurting Samsung’s sales significantly in the Asian market.
A small cause for concern for Samsung, but with the Galaxy Note 5 in the pipeline and a strong performing processor business, it’s likely just a blip as the company looks to find its place again in the smartphone market.
(Source: Bloomberg)
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