A new Korean report published today states that Samsung Electronics is expected to record an operating profit of 8.4 trillion won ($7.9 billion) in the first quarter, down 4.33 percent from a year ago, as the result of slow smartphone sales growth. The estimate did not provide figures for each of its business divisions. These will be made public in the last week of April. Yet looking forward, analysts are seeing the coming smartphone pricing wars being a negative on Samsung’s bottom line going forward.
Analysts have shown mixed reactions about the first-quarter performance. They said that the figures are mostly in line with the market consensus of 8.4 trillion to 8.5 trillion won but raised concerns about the high dependence on smartphones.
In a short-term strategy to boost profits, Samsung plans to promote its Galaxy S5 smartphone, which will go on sale globally from Friday. Yet will it really make that much of a difference considering that the Galaxy S5 made a weak start at home.
While some analysts are hoping that Samsung will bounce back in the latter half of this year after going through another sluggish quarter between April and June, other analysts are raising questions about whether Samsung’s aggressive pricing plan for the latest handset will fully pay off before Apple’s new mobiles will be introduced sometime in the second half of the year, officials said.
In light of these pressures, a senior hedge fund manager based in Seoul stated that “We recently advised our big clients to sell Samsung Electronics stocks because most profit is coming from smartphones. Other than these, we don’t see any positive factors that can lift Samsung’s profit.”Ouch. The hedge fund manager added that “Demand for TVs remains weak and the appliances market is heading towards an unfavorable season.
Mark Newman at Bernstein Research in Hong Kong stated that “At current valuations, the market is assuming the mobile business will destroy value going forward.”
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