Samsung is resolving to get leaner for the new year through a share buyback, the sale of stakes and even a shakeup of its three-CEO structure.
While Samsung still moves a bulkier volume of smartphones than any other hardware manufacturer on the planet, the Korean tech conglomerate was the only handset maker to experience a decline in mobile device sales during the third quarter of 2014.
Samsung's business, on the whole, is healthy, but the company is attempting to tighten its massive collection of divisions and to rid itself of inefficiencies in order to remain competitive with the likes of Google and Apple.
On Nov. 26, Samsung announced a plan to buy back $2 billion worth of its shares; it's the company's second largest buyback and the first one since 2007. Along with the stabilization that the buyback would bring to the company, at least temporarily, Samsung is also planning to increase dividend payout in an effort to calm investors.
As Samsung's share of the mobile market continues to slide, the Korean tech titan's $60 billion in cash is also prompting investors to demand more capital. Samsung is following the precarious example set by U.S. tech companies in the way they manage their cash balances, according to Roger Kay, president and founder of Endpoint Technologies Associates.
"You have a lot of U.S. tech companies with a lot of money who had thought of themselves as growth companies but are finding that they aren't growing anymore," Kay said.
While Samsung prepares to buy back some of its shares, it is selling $1.7 billion in stakes in four chemical and defense companies. The sell-off of the stakes is part of an effort to prepare the conglomerate since 72-year-old Samsung chairman Lee Kun-hee is getting ready to pass the company on to his children. The heirs will have to pay approximately $5.3 billion in inheritance taxes.
The share sale and several stake transfers will help the company rein in some of its modules and get leaner, which appears to be the philosophy of heir apparent Jay Y. Lee, according to Chung Sun-sup, CEO of research firm Chaebul.com.
"Samsung under Chairman Lee Kun-hee's leadership expanded into a wide range of businesses, but it looks like Jay Y. Lee is now looking to move in the other direction and make the group more compact," said Sun-sup.
As the company works to get leaner, there are also rumors that indicate that Samsung is preparing for a massive shakeup at the top. The three-CEO structure could see at least one individual stepping away to focus solely on overseeing a division.
