Samsung announced its expectations of an almost 60 percent decrease in its third quarter operating profit, which would mark the company's fourth straight quarter of slumping profits and the lowest quarterly profit since the second quarter of 2011.
The weak third quarter results was forecasted by Samsung, which said three months ago that the year's second half would "remain a challenge."
Samsung is expecting to post a third quarter operating profit of 4.1 trillion won, which is equivalent to about $3.83 billion. The figure represents a 59.7 percent decrease compared to the posted operating profit in the corresponding period last year.
Samsung also said that it expects the company's third quarter sales to be recorded at 47 trillion won, which is equivalent to about $43.96 billion.
The company released its expectations for its quarterly earnings in advance of its full earnings report, which will be released later in October and will include complete details on the earnings of each division. However, for the second consecutive quarter, Samsung included "reference materials" in its earnings guidance report, which looks to address the concerns about Samsung's current state.
The shipments of smartphones, which usually makes up about two-thirds of the company's operating profit, slightly increased for the quarter. However, the profit margins of the smartphones were negatively affected by the higher costs that Samsung placed on marketing, along with the lower sale prices for the high-end smartphones of the company.
However, despite the massive operating profit decrease, shares for Samsung actually increased by 1.1 percent shortly after the release of the earnings guidance, as investors expect the company's profits to have already bottomed and that Samsung will begin recovering with the upcoming launch of less expensive smartphones.
"Considering the operating profit guidance, it looks like the company dealt with unsold inventory issues during the third quarter," said Hong Jeong-woong, fund manager for Alpha Asset Management. "I think Samsung's earnings are at a turning point."
Samsung had seen its share in the global smartphone market decline for the previous two quarters as Apple takes over the high-end segment with the new iPhones and low-cost smartphone makers such as Xiaomi and Lenovo take over the low-end segment.
Many experts believe that Samsung's mobile division has seen its best days, and that it should sacrifice profit margins to be able to keep up with the low-cost Chinese smartphone manufacturers.
The lone bright spot in Samsung is its chip division, which the company has shown it is leaning more towards with the planned investment of $14.7 billion for the construction of a new chip production facility in the city of Pyeongtaek in South Korea.
