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1/24/2014
11:02 AM
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Samsung Profits Decline As Growth Slows

Sales of Samsung's smartphones fell slightly during the fourth quarter as the world's leading smartphone maker offers weak outlook moving into 2014.

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Samsung has spent much of the last two years eating Apple's lunch, as sales of Galaxy-branded smartphones have zoomed past most every other device in the market. But fierce competition from Apple in the fourth quarter shows that the schoolyard fight is far from settled.

The Samsung Galaxy Note 3 went on sale at the start of the fourth quarter. It's a bona fide hit -- one of the best devices of 2013. And although Samsung moved more than 10 million of them, it wasn't enough to shore up the company's financial performance. Samsung posted its first drop in profits in two years.

Samsung reported a profit of $7.73 billion on sales of $54.95 billion for the October-December period. Revenue was at a record high, but profits dropped 18% compared to the July-September period. The company cited one-off balance sheet items as the cause for its slumping profit. The company's finances took a hit from employee bonuses and currency exchanges.

Samsung said sales of its smartphones dipped slightly in the fourth quarter, but as the company no longer discloses hard sales figures for its devices it didn't say how many it sold. Analyst estimates place sales between 85 and 87 million. Sales of Samsung tablets doubled compared to the year-ago period thanks to the latest additions to the lineup.

[Things aren't looking too rosy for Nokia on the smartphone front either. Read Nokia Smartphone Sales Dip Ahead Of Microsoft Buyout.]

Smartphones, tablets, and their related components accounted for 66% of all Samsung's revenue. The rest was generated by its television and appliances businesses. Samsung blamed an over-supplied TV panel market for softness in its television unit's revenues.

Even though Samsung claims smartphones sales fell only slightly, it's alarming that the dip took place during the holiday quarter. Most companies benefit from a seasonal bump in sales thanks to end-of-the-year gifting. Samsung isn't the first company to say that fourth quarter sales were off; Nokia also reported late in the fourth quarter that sales of its flagship Galaxy S4 smartphone were well short of projections. The company had expected to sell more than 100 million devices but later revised that figure down to 60 million.

It is possible that the iPhone 5s, which went on sale mere days before the start of the fourth quarter, had an impact on Samsung's smartphone performance. Though the device is largely similar to 2012's iPhone 5, the 5s sold briskly from the get-go. Apple reports its holiday quarter earnings on January 27. Some bullish estimates place iPhone sales at 55 million for the period, which would be a record for Apple by a wide margin.

Samsung is predicting a slow first quarter, thanks to the typical seasonal drop in sales. The company may have new tablets on deck for later this month, but the Galaxy S4 isn't due for a refresh for several months yet. Samsung promised "dramatic changes" for the Galaxy S5. Until then, Samsung plans to tighten the belt a little bit, especially on marketing.

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melgross
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melgross,
User Rank: Ninja
1/24/2014 | 11:34:10 AM
Sales numbers
Samsung hasn't released any sales numbers of its smartphones or tablets, ever. The best they did was to give shipped numbers. But that stopped way back in the first calendar year quarter of 2011, when Lenovo called out their shipped numbers of tablets to the USA as bogus, and stated that of the 1.5 million Samsung claimed, they had only sold 20,000. Samsung refused to give information about that, but stated that they would no longer give out shipped numbers for their tablets and smartphones in their quarterly reports. Similar things have happened since then early during the trial between Samsung and Apple, both were required to supply actual sales numbers of tablets and phones in dispute. It was found that Samsung had sold between one third and one half the number of phones under dispute that companies such as Gartner and IDC had guessed at, and of the one million tablets guessed at having shipped to the USA during that time, only about 50,000 were sold. So when I read numbers of smartphones and tablets Samsung is guessed to have shipped, or sold, I can only shake my head at it. Nobody knows how many Samsung sells. They aren't even close in their estimates, going by real numbers that we do know of. Yet, the same companies continue to make these big number guesses, without any numbers from Samsung to calibrate their work for the future. When Samsung released those numbers for the trial, no company revised their numbers at all. One would think that they would have understood that their guesses were way off, and revised their methods for the future, but no. Samsung's numbers are likely still well below those we read about. It's sad.
nexor.kyron
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nexor.kyron,
User Rank: Apprentice
1/24/2014 | 12:20:22 PM
What?
Im sorry Nokia flagship what????

"Nokia also reported late in the fourth quarter that sales of its flagship Galaxy S4 smartphone were well short of projections"
Thomas Claburn
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Thomas Claburn,
User Rank: Author
1/24/2014 | 4:37:24 PM
Re: Sales numbers
Is the cost of Samsung's legal entanglements with Apple and others even material to its revenue?
SachinEE
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SachinEE,
User Rank: Ninja
1/30/2014 | 1:04:43 AM
Re : Samsung Profits Decline As Growth Slows
@ Thomas Claburn, I don't think so. Such legal entanglements are part of every big corporation's big monies. Though I could never understand how, yet I guess that such legal battles must be somehow paying them off in one way or the other. Apart from legal entanglements, counter advertising like Microsoft's Scroogled campaign is another similar thing.
SachinEE
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SachinEE,
User Rank: Ninja
1/30/2014 | 1:04:44 AM
Re : Samsung Profits Decline As Growth Slows
Samsung has a strong foothold in smart phone market and it is gaining in its share of tablets. In my opinion such rare quarterly slumps are not really reckonable. It is just a matter of time when giant like Samsung comes up again with some more innovative and powerful device which would make such slump forgotten soon. 
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