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Thursday, August 1, 2013

Samsung's record profit: 6.9 billion dollars for three months

Samsung relies on phone sales for the majority of its revenue
Samsung is the world's largest producer of smartphones

 By Morgan Johnes

The biggest smartphone producer reported, that they expect their profits to jump with almost 50% during the second quarter of the year. From the beginning of April this year, to the end of June, their net profit is 6.9 billion dollars, which is almost twice as big, compared to 2012, when, for the same period of time it was around 4.6 billion dollars. Their financial statement, however, showed a decrease in the profit compared to the first quarter of 2013.

The company finally presented their new model Galaxy S4. But although it managed to achieve good sales, it didn't cover analysts' expectations. Apart from that, the company spent a lot of money on promoting Galaxy S4, which raised their marketing costs. Competitors keep on showing more and more new models that increase the pressure on Samsung as a leader on the smartphone market. However, the company expects their profits to jump even more and last month they announced the preliminary financial results for the second quarter.

The statistics and expectations about the smartphone market, which the famous South Korean company outlined, are similar to the ones that Apple reported earlier this week. The renowned American company reported strong sales of their iPhone, especially in the U.S., but also showed disappointing results in China. "To some extent, Apple and Samsung have become victims of their own success," said Pete Cunningham, quoted by the New York Times. 'When these companies report many billions of profits every quarter, it’s hard to say they are doing anything wrong.'

Today, Samsung is the largest producer of smartphones and semiconductor products and displays. But still, phones generate most of their profits. The company said that on May it shipped around 10 million mobile phones. This is less than a month after the presentation of their S4. Many analysts say that the phone is more like an upgraded version of S3 and complained about the large amount of closed Samsung software in the device. In Japan, the largest operator NTT DoCoMo launched a summer campaign with big discounts for Samsung S4 and another Sony smartphone. Recently they announced that the model, which Sony offers, is a little more affordable and it is being sold significantly more than Galaxy S4.

After Galaxy S4, Samsung has introduced a few other versions of the model. Among them are original Android version; Galaxy Zoom S4 with a better camera and screen, the mini S4 version, and moisture- and dust proof Galaxy S4 Active.

Samsung usually announces its expectations for the future profits a few weeks before the public presentation of their financial data. Many people are concerned that the South Korean company may need to lower the prices of their products, which immediately will affect their profit. Also, analysts say that if Samsung wants to keep their consumers and high prices, they will have to offer some new and innovative products.

Samsung, which is also the biggest producer of televisions in the world, reported a strong rise in the sales of displays. The operating profit there has increased with almost 46% which approximately equals to 1.12 trillion. The South Korean company also said, that they have expanded their product offerings in the U.S. and China in order to increase the sales in these markets. The answer was clear – during the next few months, the unstable situation with European economy may hinder the financial growth.

About the author: Morgan Johnes loves to read and write financial news and analysis. He is currently working with mobile options trading. His passion are smmartphones and gadgets.

Image license: Ziggymaster; GFDL, CC BY-SA 3.0