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Samsung lowers Q2 earnings forecast on slow mobile sales, high ad costs

Samsung Electronics Co., the world's largest technology firm by revenue, on Friday fuelled concerns about flagging demand for high-end smartphones with a weaker-than-expected earnings forecast for the second quarter.

The South Korean giant forecast of 9.5 trillion won ($8.3 billion) in operating profit for the April-June quarter which would be a record. But analysts had expected a figure of more than 10 trillion won.

'It's weaker than expected. Slow mobile sales, combined with hefty marketing costs for the flagship Galaxy S4 smartphones, undermined the bottom line,' Jeff Kim, of Hyundai Securities said.

And Daiwa Securities analyst Jae H Lee said the firm would likely be hit further by higher advertising costs in the second half as it tries to keep sales volumes up. Samsung has lost nearly $30 billion in market value since mid-March, before it launched the Galaxy S4 smartphone a month later.

Investors are concerned that the company relies too heavily on IT and mobile business, which accounts for more than 70 per cent of its operating profit, at a time when the global outlook for this sector is not so bright, Jeff Kim said.

Several brokerages have downgraded Samsung and their earnings forecasts for the company on fears that the S4 is not selling as strongly as hoped.
Kim Young-Chan, an analyst at Shinhan Financial Investment said Samsung's other business lines — semiconductor and display units — were projected to have produced good results. Samsung, the world's top maker of smartphones, memory chips and flat-panel TVs, was giving earnings guidance before official results at the end of July. The estimate for second-quarter operating profit represents a 47 per cent increase from the actual figure of 6.46 trillion won a year earlier.
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