Samsung CFO: Expect Q2 to be 'Not That Good'

Samsung CFO: Expect Q2 to be ‘Not That Good’

Written by DH Kass 1
June 27, 2014

Samsung’s chief financial officer Lee Sang Hoon warned earlier this week the mobile device maker could post another quarter of declining profit when it discloses its preliminary second-quarter earnings, perhaps as soon as next week.

Lee told South Korean media that Samsung’s results for the period may be “not that good,” in comments Bloomberg and others subsequently reported as well. Analysts expect Samsung to record flat operating profit of about $8.2 billion for the period ending June 30. A Samsung spokesperson told Bloomberg that Lee offered his comments to the South Korean outlet on his way to an internal meeting.

What “not that good” really means is kind of anyone’s guess, but the smart money should sit on slowed smartphone sales.

Samsung has posted two consecutive quarters of declining profit as growth in its high-end smartphone sales slows. While the vendor’s Q1 results mapped to its guidance, operating profit fell 3.3 percent to $8.2 billion but net profit ticked up 5.9 percent to $7.34 billion on $52 billion in sales. At the time, Samsung said it expected Q2 results to improve, owing to the bump in sales it anticipated from its Galaxy S5 smartphone, which it began selling in early April.

While Lee didn’t provide any details on Galaxy S5 sales for the quarter, the smartphone apparently has not met sales expectations, no matter how stratospheric, and Samsung has been relatively quiet about the device’s performance in the market other than to say it shipped about 11 million units in the first month of availability.

The buzz is that Galaxy S5 sales have slowed considerably since then. According to Korea’s United Daily News and repeated by the site Patently Apple, Samsung’s supply chain sources are saying the vendor has shipped nearly 29 percent fewer Galaxy S5 smartphones this quarter than the 21 million units planned.

The chatter is that Samsung’s next big product release—for the Galaxy Note 4 5.7-inch phablet—could occur around IFA 2014, which runs Sept. 5-10. If Samsung holds to that release schedule, it will beat Apple’s (AAPL) iPhone 6 to market, which some accounts have said will debut later the same month.

When Samsung does report its Q2 earnings, here are a few things to look for: