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Samsung says profits to fall by 60% in Q3... future looking bleak

News by Luke Jones on Tuesday October 07, 2014.

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The Galaxy S5 did not meet sales expectations
The Galaxy S5 did not meet sales expectations

Samsung has had a poor 2014 and things are not looking very good for the foreseeable future either after the Korean giant confirmed that it will lose money again through the third quarter. The company has said that third quarter profits will sink below analyst predictions and will slide year on year for the second consecutive period.

In a statement, Samsung said that its third quarter profit has most likely fell 57.8% to 61.8% from a year earlier to between 3.9 trillion won ($3.6 billion) and 4.3 trillion won ($4.0 billion). That is an enormous decline from the previous year when third quarter operating profit stood at 10.2 trillion won ($9.5 billion). The decline speeds up a process that started in the second quarter when Samsung announced a slip in profits of 31% from $6.28 billion last year to $4.32 billion in 2014.

2014 will almost certainly close as a year to forget, not even a well performing Galaxy Note 4 will change that outcome, but 2015 could get even worse. In fact, Samsung's component making division that manufactures and supplies chips to companies such as Apple is likely to be more profitable for the company in 2015 than its mobile division. That only puts more pressure on Samsung to keep relations with Apple, even if the chip deal is a two way street it is the Korean company that stands to lose more should the accord collapse.

Things have not been going well for the company of late and its profits fell during the second quarter of 2014. In some ways the problems are masked by the fact Samsung still rakes in billions of dollars in profits, but those numbers are slipping and not many other smartphone brands have had such a disastrous time this year. That Samsung has a high profit figure to fall back on is starting to be irrelevant as the company continues to slide amid strong competition and disenchantment over the business model.

A massive increase in popularity from Chinese companies in emerging markets has removed Samsung's hold on the budget and mid-range in those regions. Xiaomi has provided a particular threat that seems to target Samsung more than it does key rivals such as Apple, with Cupertino's iPhone operating in a different market space. The high end has also been problematical for Samsung, with the Galaxy S5 not gaining the traction or sales the company had hoped for.

Samsung is better equipped to ride the losses compared to most companies, but this year has been a drastic decline and the company is seeing similar issues as Blackberry and HTC a few years ago. Of course, that does not mean Samsung will become the disaster that Blackberry became or will struggle endlessly like HTC has, it has a long way to fall to get there. However, this is a company (the mobile division at least) in decline and it is now a company in desperate need to finding hardware that can appeal to the market once again.

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About the author

Luke Jones
Luke Jones is the Managing Editor at MobileBurn.com and is the person you need to speak to about the content on the site. Luke studied creative writing at degree level before carving out a reputation as a freelance tech writer. He settled here at MobileBurn, where he reviews devices and contributes to the news, as well as overseeing the site's content and direction.

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