Samsung Electronics just released their quarterly financials and disappointed on all fronts. It was the worst quarter in two years as the South Korean giant saw revenue and profits decline sharply and their overall smartphone market share dropped significantly.
- Revenue: $50.86 billion (decrease of 9%)
- Operating Profit: $6.99 billion (decrease of 25%)
- Net Income: $6.11 billion (decrease of 20% compared to last year)
- 95 million mobile handsets sold, 80% smartphones
According to IDC Research Samsung dropped from 32 to 25% in overall market share. While they are still the largest smartphone brand the challenge becomes clear when you look at the fact that the overall market has grown by 23% since last year while the number of units Samsung shipped declined by 4%.
IDC reports that Huawei and Lenovo were the two brands that drove the increase in the market, especially in emerging markets and the low-end segment. That is a market which Samsung has struggled to capture so far. Huawei is gaining market share quickly, so far this year they have shipped 34 million phones and Nokia has been successful with their entry level Lumia models in emerging market as well.
Higher than expected marketing expenses also impacted the button line. The company said that it was necessary to increase marketing efforts in order to clear inventory ahead of new product launches.
They didn’t give many details about the new models other than saying several would be coming in the next few month including a new flagship with a large screen, new design and material.
Let’s compare the financials to Apple as they reported their quarterly results earlier this month: While Apple generated less revenue ($37.4 billion), they managed to generate more net profit, $7.7 billion. Apple sold fewer phones than Samsung (35.2 million) but there are two fundamental differences here: Apple can show year over year growth, showed their strongest iPhone sales for the current period and unlike Samsung the company has not released new phones every quarter. With the upcoming iPhone 6 we should see the iPhone units increase dramtically.
Samsung is facing stiff competition from all sides. There is no doubt the iPhone 6 will be a success , at least in terms of sales, companies like Huawei, HTC and Lenovo are investing big in growing their market share in the high-end segment and Samsung has not been able to really compete in emerging markets with low-end models making up a majority of the smartphone sales.
The new flagship will be important to defend their leading position in the high-end space while they also need to come out with compelling models in the mid- and low-end segment.