Samsung, HTC Financials Raise Smartphone Questions

Has the high-end smartphone market peaked? Samsung's and HTC's Q2 results offer some clues. Read on for more …

Samsung last week gave an early look at its Q2 results—the company is scheduled to report fully on July 26—a peek that revealed the Korean giant missed analysts’ expectations despite huge revenue and operating profit gains, while Taiwanese rival HTC reported a steep drop in net income, despite a warm buying reception for its flagship HTC One unit.

With BlackBerry (BBRY) having already posted a dismal fiscal Q1, and Apple (AAPL) slated to report on July 23 amid growing concerns over iPhone sales, what’s up with the once go-go smartphone market?

The market leaders may be suffering from what’s being called smartphone fatigue—in other words, nearly everyone in the world who can afford a high-end smartphone already owns one—forcing the device makers to scramble for new buyers in new markets. Where growth is expected—at the low-end of the market, is a strata big wigs Apple and Samsung—and a number of others—don’t play. Although Apple is rumored to have a budget iPhone in the works, low-cost devices has never been either its or Samsung’s market play.

That explains part of why Samsung’s stock got hammered late last week when the manufacturer pre-announced below-expectations growth, despite an expected $8.3 billion operating profit for Q2, a 47 percent year-over-year increase, and an anticipated 20 percent rise in revenue for the period. Still, Samsung's smartphone explosive growth is slowing and the Galaxy S4 isn't selling to at the meteoric levels expected. While Samsung’s gains are impressive, analysts and investors evidently wanted more.

As for HTC, the Taiwanese vendor’s Q2 net profit fell 83 percent year-over-year and revenue slid some 22 percent, owing to competition with market honchos Apple and Samsung that impaired sales of the HTC One. To boost sales, HTC is stepping up its marketing and sales efforts in China.

With Galaxy 4 sales slowed, it will be interesting to see, for its part, when Apple reports its Q2 results if customers have elected to wait on buying the iPhone 5 in anticipation of the vendor's next round of smartphones coming this fall. That might translate to lower than expected iPhone 5 unit sales and a more definitive downward trend line for smartphones.