The result highlights how dependent the company has become on smartphones for its earnings. Sales growth in high-end Android devices has waned after several years of rapid expansion. Growth remains robust in emerging markets where cheap competitors have sprung up.
The South Korean electronics giant said Tuesday its operating income was
The figure was the lowest since the second quarter of 2012 when Samsung's income was
Quarterly sales fell 10 per cent from the previous year to
Samsung, which usually doesn't elaborate on its financial performance until its full report later in the month, issued a rare statement to explain its result, which Nomura analyst
The company blamed the lower profit on the South Korean currency's appreciation against the U.S. dollar and the euro, as well as most emerging market currencies. The won hit a 6-year high against the U.S. dollar earlier this month.
It also said sales of medium- and low-end smartphones were weak in
Samsung, which earlier this year vowed to aggressively expand its tablet sales, acknowledged it faced some challenges in selling tablet computers. Consumers weren't replacing their tablet PCs as often as smartphones, while smartphones with a giant screen of 5 or 6 inches, such as Samsung's Galaxy Note series, replaced demand for smaller tablets that measure about 7 or 8 inches.
"Expectations have been lowered on Samsung," said
About three in every 10 smartphones sold globally were made by Samsung in 2013 and the company's handset sales will likely improve during the current quarter. But Cho said how much profit it can take would be more important than how many handsets it can sell because most sales growth would come from cheap smartphones.
In the cheap smartphone market, Samsung faces an uphill battle against brands such as Xiaomi and
Xiaomi, an upstart Chinese company that is moving into other Asian countries, surprised the industry with its
Samsung shifted its focus to affordable smartphones, tablets and wearable devices, such as the Gear smartwatches, to offset falling profit but they are yet to arrest the declining earnings from smartphones and components in mobile devices that Samsung supplies such as memory chips and display screens.
Shares of Samsung closed 0.2 per cent higher in
"The company cautiously expects a more positive outlook in the third quarter with the coming release of its new smartphone lineup," it said. "Samsung expects stronger smartphone sales and this will have a positive impact on the company's display panel businesses."
But some analysts were not convinced about Samsung's long-term prospects.
"Though we anticipate some positive earnings impact for the component businesses (in the third quarter), we see growing uncertainty over Samsung's future earnings in the long-term," Chung, the
Chung cited Apple's upcoming release of the iPhone 6, the increasing difficulty in standing out from a plethora of other Android devices and the falling appeal of premium smartphones, a reminder of the PC market that came to be flooded with cheap almost identical products.
Samsung is expected to announce an upgrade of the Galaxy Note series in the fall around the time when Apple usually upgrades its iPhone.
Most Popular Stories
- Pickup Discounts Boost September Auto Sales
- Teresa Giudice of 'Real Housewives' Faces Prison Time
- Lexus Luxury Compact Sedan Wins Buyers
- Kurdish Militia Still Lack Weapons, Training
- Review: Pay by Phone or Just Keep Using Plastic?
- N.Y. Ups Awards of State Contracts to Minorities
- Dallas Parents Fear Students Exposed to Ebola
- Ebola Victim Was Sent Home by Dallas Hospital
- Why the Bond Market Isn't as Safe as You Think
- Group Offers Online Help for College Students