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Samsung Loses 8% in Profits

Samsung Loses 8% in Profits

by P. H. MadoreJuly 31, 2015

On the heels of news that Apple is eating up around 92% of all profits in the entire smartphone market, Samsung has announced that its profits are down 8% from this time last year. The company released the Galaxy S6 and S6 Edge in March.

The company’s earnings of $4.9 billion are significantly short of predicted earnings, by around a billion dollars. Samsung is still the largest smartphone vendor but it says it has been affected by an overall drop in smartphone sales. Adding to this, competitors like Apple take up significant chunks of the money being spent on smartphone devices. Apple also posted major gains over last year.

Samsung phrased its situation like this:

Despite the launch of Galaxy S6, improvement to earnings was quite marginal due to low smartphone shipments and an increase in marketing expenses for new product launches.

The company spent roughly $70 million on advertising for the new S6, only to see mild returns. Samsung does not rely solely on the smartphone market, however, and so the thrust of the report was how much other areas of the company had brought in. The company’s overall profits have been on a downward path for seven quarters straight, dropping by a significant amount each quarter. According to its report, Samsung expected some aspects of its business to pick up in the near term, such as televisions.

The report also clarifies that the company did see “marginal” increases in profits from mobile devices.

Overall revenue improved slightly QOQ for the Mobile Business, due to increased shipments of the Galaxy S6 and Galaxy S6 edge, despite a drop in overall smartphone shipments caused by declining shipments of older middle- to low-end models. Although revenue increased, profits increased marginally QOQ, due to supply difficulties from higher than expected market demand for the Galaxy S6 edge, as well as increased marketing expenditures that typically accompany flagship product launches.

This could mean that the losses are temporary and that Samsung expects the market to pick back up. It could also mean that other areas of the company are to blame for bleeding profits. In either case, the company is operating in a market that has become increasingly saturated with cheap devices and low-cost service. For Samsung and other major manufacturers to continue to compete, new novelties will have to be continually discovered, such as ways to enable even poorer populations to make use of smartphone technology. After all, the finish line in the mobile race is the largest network.

Image from Ivan Garcia / Shutterstock.

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