News Column

Sales show Samsung needs next big thing

July 8, 2014

By Mike Snider, @MikeSnider, USA TODAY



The next wave of Galaxy smartphones and mobile devices cannot come fast enough for Samsung.

The electronics giant needs to get its mojo working again. Sales were sluggish during second quarter of 2014 -- down 24% from last year -- the Seoul-headquartered company announced in its earnings preview.

Operating income of 7.2 trillion won ($7.1 billion) amounted to a two-year low for Samsung -- far below the analyst estimates of 8.1 trillion won. The company will release full earnings at the end of the month.

One of the biggest problems for Samsung is that it's getting squeezed on the high-end in the highly competitive smartphone market by Apple and on the low end by Chinese competitors Huawei and Lenovo.

During the first quarter of 2014, Samsung saw its share of the global smartphone market fall for the first time in four years -- to 31%, according to Strategy Analytics.

Additional factors contributing to the disappointing earnings forecast: increased competition in Europe, a stronger Korean currency and increased marketing expenditures for the release of the Galaxy S5.

The company did not release information on sales of that phone, which has several innovative features, including a built-in heart rate monitor and fingerprint scanner -- and it is waterproof. Improved smartphone sales are expected, which will mean increased sales of Samsung-made displays.

Samsung stock rose slightly Tuesday, perhaps because of Samsung's expected improvements next quarter, or "investors thinking that the worst is over," says analyst Adnaan Ahmad with Berenberg Capital Markets. Still, he expects smartphone and mobile profits to continue to decline.

Samsung will need "an amazing new 'innovation' product to help it meet its goals of growing its business from $200 billion last year to $400 billion in 2020, he says.

Anticipation is building for the Galaxy Note 4 phablet, expected in September, possibly along with a higher-end version of the Galaxy S5 smartphone, to be followed early next year by the Galaxy S6 smartphone. In addition to likely boasting better cameras, improved memory and other functions, at least one of the devices could have a flexible OLED screen.

With Apple expected to launch larger iPhones this fall, Samsung needs to deliver renewed firepower of its own. Its curved Ultra HDTVs are gathering attention, and the company just launched a new smart watch. I hope the company has a trick or two up its sleeve, and Apple, too, for that matter.

It's that type of energetic marketplace competition -- as opposed to litigation -- that engages consumers and makes them willing to buy new devices or replace old ones.




JUNG YEON-JE, AFP/Getty Images


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Source: USA Today


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