Samsung profits drop beats forecast
Samsung's quarterly earnings have dropped by a smaller than expected 27% in the electronics giant's fourth quarter, but its forecast-beating profit could not hide the fact that it is losing the battle of the big phones with Apple.
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 sales of the Galaxy Note 4, its flagship smartphone measuring 5.7 inches diagonally, increased from the third quarter, but 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 the South Korean firm.
Samsung, the world's top smartphone maker, said its October-December earnings were 5.3 trillion won (£3.2 billion), compared with 7.3 trillion won a year earlier.
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, according to financial data provider FactSet.
Sales fell 11% to 52.7 trillion won from a year earlier while operating profit slumped 36% to 5.3 trillion won, in line with Samsung's preview earlier this month.
The 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 would focus on "the successful implementation of its new product line-up strategy", and repeating its previous statements that it would 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 remains 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% for the year of 2014.