Samsung's Q4 profit drops 27 percent, sales drop by 11 percent

Seoul, South Korea: Samsung Electronics Co. said Thursday its quarterly earnings dropped smaller-than-expected 27 percent in the fourth quarter but its forecast-beating profit could not mask that it was losing the battle of the big phones with Apple Inc. Samsung’s quarterly net income has dropped over a year earlier for four straight quarters. But the bottom line was a moderate recovery from the previous quarter’s 4.2 trillion won and higher than analysts’ forecasts of 4.4 trillion won, according to financial data provider FactSet. Sales fell 11 percent to 52.7 trillion won from a year earlier while operating profit slumped 36 percent to 5.3 trillion won, in line with Samsung’s preview earlier this month. The company beat forecasts not because of a fundamental improvement in its mobile phone business, but mainly thanks to solid performance of component businesses, such as memory chips and display panels. Samsung said its sales of the Galaxy Note 4, its flagship big-size smartphone measuring 5.7 inches diagonally, increased from the third quarter. But said its overall smartphone sales during the quarter were between 72.2 million units and 75.1 million units, confirming analysts’ forecast that Apple, at its record-high 74.5 million sales of iPhones during the same quarter, has narrowed its smartphones shipments gap with Samsung. Samsung, the world’s top smartphone maker, said that its October-December earnings were 5.3 trillion won ($4.9 billion), compared with 7.3 trillion won a year earlier. The Korean company’s mobile business began to struggle in 2014, while Apple enjoyed record-high sales of the bigger iPhones that it released in September, which drove the stellar earnings that it reported on Tuesday. Samsung’s IT and Mobile division that makes Galaxy phones recorded operating profit of 1.96 trillion won in the October-December quarter, less than half of the 5.47 trillion won operating profit in the same quarter of 2013. But that was still better than the July-September period’s 1.75 trillion won operating income. The recovery from the previous quarter showed that the dramatic decline in its smartphone business may have stopped. The company said its mobile phone business’s performance improved from the three months earlier because the Galaxy Note 4 and other high-end smartphones saw higher sales that offset a drop in sales of cheaper phones. Its management of marketing expenditures was efficient, its statement said. The company was shy about giving a clear guidance of how its mobile business would perform during the current quarter. It said it will focus on “the successful implementation of its new product line-up strategy” and repeating its previous statements that it will try to differentiate smartphones by new materials and designs. Facing a dramatic fall in smartphone sales, Samsung vowed last year to reduce the number of smartphone models to streamline businesses and to adopt a change in design by using metal in more high-end models. Samsung has introduced the Galaxy Note Edge, the big-size smartphone with a curved side display, but it remained a niche product rather than a mainstream model. Samsung is expected to unveil an update to its flagship Galaxy S model in the spring. As its stock prices slumped due to weak earnings, the company said it decided to increase annual dividends by 40 percent for the year of 2014. Associated Press