News by admin on Thursday October 30, 2014.
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Samsung announced its third quarter financial results yesterday and the news is not good for the company, with the gloomy predictions coming true. The Korean giant raked in $3.9 billion in profit through the period, a figure that would delight most companies but represent a huge slide for Samsung, the second quarter in a row where profits have tumbled.The profit was a massive 60.1 percent dip from the same period last year when the company made $9.6 billion. Those were the good old days as Samsung has been struggling in 2014, and the problems seem to stem mostly from the smartphone business. The Galaxy S range seems to be the biggest culprit, with the S5 particularly failing to ignite consumers like previous models did. The current Galaxy Note 4 was released too late to make a difference for this period, while midrange devices increased sales but could not offset the decline in high end models. Over the third quarter in 2013 the company drew in $6.34 billion, but this year has scraped to achieve $1.66 billion, the worst performance since the first quarter of 2011. While TVs and PCs continued to record growth for Samsung, it is in the smartphone space where investors are drawn to the company. With increased competition from Chinese brands, those investors will be looking to see how Samsung can turn its fortunes around.
SAMSUNG PRESS RELEASE Samsung Electronics announced financial results for the third quarter ended September 30, 2014. Samsung's revenue for the quarter was KRW 47.45 trillion, a 9 percent decrease quarter-on-quarter (QOQ), while the operating profit for the quarter was KRW 4.06 trillion, a decrease of KRW 3.13 trillion QOQ. In the company's earnings guidance disclosed on October 7, Samsung estimated third quarter consolidated revenues would reach approximately KRW 47 trillion with consolidated operating profit of approximately KRW 4.1 trillion. Despite a marginal increase in sales volume, the IT & Mobile Communications (IM) Division saw earnings fall for two consecutive quarters, as smartphone average selling price (ASP) declined due to reduced prices for older models and increased sales of middle-end smartphones. Meanwhile, the Consumer Electronics (CE) Division fell short of expectations, due to ASP decline of TVs and an earlier-than-expected end to the peak season for air conditioners. Looking ahead to the fourth quarter, Samsung cautiously expects an earnings increase, driven by strong seasonal demand for TVs and continued growth momentum for the Memory Business. In particular, the company expects increased market demand to improve earnings for the System LSI Business and the Display Panel segment. Although the company anticipates a demand growth for the recently launched Galaxy Note 4 and new middle-end smartphone models, uncertainty remains for the IM Division, due to the year-end surge in competitor smartphone launches, which may require a potential increase in marketing expenses associated with year-end promotions. Capital expenditure (CAPEX) in the third quarter totaled KRW 4.3 trillion, as KRW 2.4 trillion and KRW 1.2 trillion were spent on the Semiconductor Business and the Display Panel segment, respectively, bringing the year-to-date CAPEX to KRW 14.5 trillion. In sum, Samsung expects its 2014 CAPEX to total mid KRW 24 trillion by the end of the current fiscal year, which is at par with a previously announced guideline. Meanwhile, the company's selling, general and administrative (SG&A) expenditures, which include marketing expenses, decreased by approximately KRW 800 billion QOQ. Components Business Leads Earnings The Device Solutions (DS) Division posted KRW 16.29 trillion in consolidated revenue and KRW 2.33 trillion in operating profit for the quarter. The Memory Business saw stable demand in the third quarter, and accordingly focused on products with higher profitability while continuing process migration. However, the System LSI Business saw its earnings decrease, due to a combination of weaker demand for its application processors (AP) and customer component inventory correction. In the fourth quarter, the stable supply and demand balance is expected for the Memory Business, while the System LSI Business will look to improve its performance by increasing supply of 20-nanometer mobile APs and expanding sales of LSIs. In 2015, the Memory Business anticipates stable demand throughout the year. The company recently announced a number of investments associated with semiconductors, which include the use of phase one of Line 17 for DRAM whose main purpose is to address the natural capacity losses attributed to process migration, as well as the PyeongTaek semiconductor fabrication plant which will enable the company to meet demand growth over the mid to long term. Additionally, 14-nanometer wafers are already being processed to meet mass production schedule by the end of 2014, in time to meet customer demand increase in 2015. OLED Panel Sales Decline, But Outlook Remains Positive The Display Panel segment posted KRW 6.25 trillion in consolidated revenue and KRW 60 billion in operating profit for the quarter. In the third quarter, the Display Panel segment saw its strong LCD panel sales offset by weak sales in OLED panels. Going forward, LCD panel sales are expected to remain strong in the fourth quarter, driven by growing demand for larger display panels and a burgeoning UHD TV market. The company will also look to increase OLED panel sales by increasing its customer base and focusing on high-end smartphone panels. In 2015, demand for LCD panels is expected to remain stable, and the company will focus on further increasing profitability by expanding mass market line-ups and increasing sales of premium products, including curved panels. With regards to OLED panels, the company will concentrate on flexible displays and cost competitive, glass-based OLED panels for the middle-end smartphone market. Smartphone Earnings Dip Amidst Intensifying Competition The IM Division posted KRW 24.58 trillion in consolidated revenue and KRW 1.75 trillion in operating profit for the quarter. Despite the marginal increase in third quarter smartphone sales, smartphone earnings decreased QOQ, as the company's cost structure was adversely affected by the revenue drop. In addition, the ASP of smartphones declined due to an increased share of middle- to low-end smartphone sales and price reductions of existing smartphone models. Meanwhile, tablet sales and revenue increased QOQ, highlighted by the growing sales of the Galaxy Tab 4 series and the Galaxy Tab S. In the fourth quarter, market demand for smartphones is expected to increase QOQ, driven by the newly launched flagship model, the Galaxy Note 4, and new middle-end smartphone models as well as the year-end seasonal demand. However, market competition is expected to further intensify. Moving forward in 2015, the company will focus on enhancing product competitiveness for each price tier and solidify longer term business fundamentals, in order to secure sustained growth and profitability. In particular, smartphone models will be further differentiated through flexible displays and metal frames, while the company's new product development strategy will focus on streamlined strategic models in each price category to enhance product and cost competitiveness. Differentiated technologies and designs will also be applied to tablets. As for the wearable business, it will be developed into the company?s next growth engine through further diversification of the wearables portfolio. Despite Sustained Leadership in TVs, CE Division Profitability Decreases The CE Division, encompassing the Visual Display (VD), Digital Appliances (DA), Printing Solutions and Health and Medical Equipment (HME) Businesses, posted KRW 11.6 trillion in consolidated revenue and KRW 50 billion in operating profit for the quarter. The setback in profitability was due in part to a decrease in TV ASP, which was compounded by stronger panel price and weak demand for large screen TVs. Nevertheless, Samsung TVs continued to retain their No. 1 ranking in consumer brand recognition and preference surveys in key markets, cementing the company?s position as a leading consumer electronics company. Meanwhile, profit margins for the DA Business narrowed due to a slowdown in air-conditioner sales, brought on by the shorter-than-expected summer season. Looking ahead to the fourth quarter, Samsung will look to improve profitability by leveraging the peak holiday season to drive sales of the company's diverse TV lineups and by strengthening region-specific promotions for premium products. In 2015, the company anticipates further growth of the UHD TV market and strong demand for larger screen TVs, and expects growth momentum will continue to be driven by market demands in Asia and other emerging markets. Samsung will look to further solidify its enduring leadership in the global TV market by introducing innovative premium models, expanding regionalized lineups and by increasing the competitiveness of low-end models. As for the DA Business, the company plans to focus on expanding revenue stream and achieving sustained growth by expanding the enterprise business, increasing competitiveness in mass market products and by generating new demand through the introduction of innovative products.source: Samsung