SEOUL, South Korea – Samsung Electronics Co. today forecasts a 4 percent drop in its anticipated second-quarter profit.
Sales declined 8% from a year earlier to 48 trillion won, also falling short of analysts’ consensus of 52.8 trillion won. The company is scheduled to disclose its net profit and breakdown figures among its business divisions later this month.
The tech giant expects third quarter operating profit of 4.1 trillion won ($3.8 billion) and sales of 47 trillion, below Reuters’ forecasts of 5.6 trillion and 50.9 trillion, respectively. This would mark Samsung’s fourth consecutive operating profit decline.
Analysts believe that Samsung’s failure to meet the demand for it’s latest flagship curved-screen phone dubbed Galaxy S6 EDGE, coupled with low demand of Galaxy S6 from it’s key markets was a major cause of decline in it’s mobile business earnings. The shortage in supply of S6 EDGE was largely attributed to the difficulty in production which invariably affected supply.
Though samsung claimed it has fixed the S6 EDGE supply shortage, it may be too late to fully capitalise on the cravings in competition for new high-end devices ahead of Apples Inc’s launch of the latest iPhones, expected as early as September.
Samsung’s smartphone sales were also hit by a new law that was enforced in South Korea last year, which barred handset vendors from giving hefty subsidies to phone buyers. The measure has seen Samsung’s long standing rival Apple Inc., recording a marginal growth of iPhone sales in South Korea. Also, Apple’s newest models, iPhone 6 and 6Plus launched with larger screens that were similar in size to the Samsung phones, decimating one of Samsung’s advantages.
Counterpoint Technology Market Research, a market research firm, in June announced that Samsung sold six million smartphones of Galaxy S6 and S6 Edge by the end of April, selling at a faster rate than its 2014 predecessor model.
But the research firm also said the chance of Samsung’s flagship models overtaking Apple’s iPhone 6 series was small due to production constraints for the curved glass that had recorded demand.
Samsung’s share price, which has fallen 7.2 per cent this year, was largely unaffected in the early trading as it gained 1% higher on tuesday following the earnings estimate.
The announcement shows that Galaxy S6 and s6 EDGE toutet to be the pivotal handsets to lead a much-anticipated recovery at Samsung’s smartphone division failed to meet expectations.