Can Samsung’s Galaxy S6 Models Halt Profit Losing Streak?
Samsung extended its earnings losing streak to six straight quarters as the Korean mobile device maker’s Q1 profit fell 39 percent to $4.35 billion from this time last year, a slide directly attributed to the dreary performance of its mobile business, which posted a 57 percent drop in profit to $2.5 billion.
The vendor’s revenue for the quarter toppled 12 percent from last year to $44 billion as operating income fell 30 percent to $5.5 billion, in line with Samsung’s guidance earlier this month. In early April, Samsung said it expected Q1 operating profit at $5.43 billion, ahead of analysts’ estimates of $4.8 billion.
Samsung, which has struggled for more than a year to fend off smaller mobile device makers, particularly in emerging markets, this time wasn’t so much victimized by unit sales of rival Apple’s (AAPL) iPhone 6 and 6 Plus but rather by average selling price.
A substantial portion of Samsung’s analyst-estimated 83.2 million smartphones sold during the quarter, 35 percent more than Apple’s 61.2 million iPhones, were its cheaper Galaxy A series, eating into the Korean manufacturing’s overall mobile profits.
Still, despite the quarterly loss, Samsung recaptured its top position from Apple among smartphone makers during Q1 with 24 percent of the worldwide market, well ahead of the 17.7 percent stake the iPhone maker recorded, according to researcher Strategy Analytics. Samsung’s share of the market fell 7 percent from last year while Apple boosted its stake by about 2.5 percent, the researcher said.
Separating out mobile sales, Samsung reported revenue of $24.1 billion for the quarter amid its aforementioned profit slide. The vendor said it plans to streamline its low-end and mid-range lineup–a plan it first mentioned late last year–while still relying on sales of its new flagship Galaxy S6 and Galaxy S6 Edge to boost sales and earnings.
Still, the vendor said Galaxy S6 and S6 Edge shipments won’t overcome margin erosion in the low- to mid-range of the market. But Samsung projected the smartphones will boost earnings sequentially in Q2 from the preceding three months, amid higher demand for its semiconductor products and display panels.
“The S6 should do well,” Kwon Oh-hyun, Samsung vice chairman told attendees at an affiliates meeting at the vendor’s headquarters in Seoul, Korea, last week. “The first week looks impressive,’” he said.
In early March, preliminary sales numbers showed 20 million pre-orders for the Galaxy S6 and Galaxy S6 Edge with carrier T-Mobile saying it already has sold twice the number of the new phones as it did the earlier Galaxy S5 a year ago.
“We expect 70 million plus,” a Samsung executive told the Korea Times, on the vendor’s sales forecast for the Galaxy S 6 platform.