Samsung has posted a devastating drop in its quarterly earnings for its mobile and IT division, which is one of the South Korean electronics maker's biggest sources of profit.
Just a day after its rival Apple announced its biggest profits in its entire 38-year history, Samsung reported operating profits of 1.96 trillion won ($1.8 billion) for its mobile and IT unit, representing a 64 percent drop from the division's earnings of 5.47 trillion won ($5 billion) during the same quarter last year. Sales for the business unit was down by 22 percent to 26.3 trillion won ($24.2 billion).
Samsung senior vice president and head of investor relations Robert Yi said during Samsung's earnings call that the company expects "the business environment in 2015 to be as challenging as in 2014." He attributes this to the growing competition in the smartphone industry and a continuing decline in smartphone and tablet demand for the current quarter.
This marks the fifth consecutive quarter of earnings decline for Samsung, and although the 64 percent decrease should be seen as an improvement over the third quarter's 74 percent drop, the two consecutive massive declines have vastly affected Samsung's mobile and IT division's contribution to the company's overall earnings.
Only 37 percent of Samsung's 25 trillion won ($22.8 billion) yearly earnings, which is down 32 percent from last year's 36.8 trillion won ($33.6 billion), came from its mobile division, compared to the 76 percent contribution the business unit held during the first quarter last year.
The dire outlook for Samsung is in stark contrast with Apple's mind-blowing figures posted on Tuesday, Jan. 27. Samsung's Cupertino-based competitor said it sold a record-setting 74.5 million new iPhones during the fourth quarter, blowing past analyst expectations of 66.7 million units and earning for Apple a 37 percent increase in quarterly operating profits to $24.2 billion.
During Apple's quarterly earnings call, CEO Tim Cook said the number is "hard to comprehend." On average, Apple sold 34,000 iPhones every hour 24/7 during all the days of the last quarter.
"I think after learning a hard lesson, we'll see a significant improvement in terms of design, build quality and on the specs," said analyst Warren Lau of Maybank Kim Eng. "The question right now is whether this is enough."
Samsung did not specify how many smartphones it sold during the last quarter, only saying that the number of units shipped declined. Analysts estimate it to be somewhere around 74 million to 77 million units, prompting them to declare that Apple and Samsung are now the biggest smartphone makers in the world.
"Apple's new iPhone 6 and 6 Plus models are proving wildly popular in China, United States and Europe," said Neil Mawston, executive director of Strategy Analytics. "Apple tied with Samsung to become the world's largest smartphone vendor for the first time since Q4 2011."
In China, where Xiaomi previously overtook Samsung and Apple as the biggest smartphone company, the South Korean smartphone maker dropped to No. 3 as Apple raced ahead of the two companies in December, according to a report by market researcher Canalys.
Samsung was the biggest smartphone company in China for 10 straight quarters until the second quarter of 2014, when Xiaomi, which sells high-end smartphones for a fraction of the price of Samsung's phones and the iPhones, took over.
