Samsung Electronics is expected to post losses for Q2 2014. Forecasts don't look promising either after earnings dropped at the end of the quarter.
Samsung benefited from the smartphone boom that took over the market in recent years but growth for the company is now stabilizing. The recently released Samsung Galaxy S5 is doing well so far but not as well as it was hoped to make a difference for the company as the second quarter ended.
Cheaper devices still hold a chunk of the market and there's still Apple to contend with, most especially with the looming release of the iPhone 6. There is hope that conditions will improve when the third quarter of the year starts but many consumers are holding off buying smartphones until Apple's newest offering is released around September.
BusinessKorea attributes Samsung's poor performance to the decline in the smartphone market. Up to 70 percent of gross operating profits come from Samsung's Information Technology & Mobile Communications division so a drop in the division's earnings for the second quarter clearly affected the company.
Reports point out that "growth will mostly be coming from mid-tier and budget phones, which have lower margin than premium phones with a price range between $250 and $300 per unit."
Speculations estimate that Samsung will be reporting quarterly profits below 8 trillion won for the first time in two years. LIG Investment Securities also cut target price for the company's stock from 1.75 million won to 1.6 million won.
Reuters, on the other hand, reports average forecast puts operating profits at 8.3 trillion won, down from the 9.5 trillion won Samsung made a year earlier. This marks the weakest the company has posted since Q3 2012.
What about wearable technology and other products Samsung can tap into?
The company is yet to make a big breakthrough and what it does have now is still in their early stages. Competition is tough too, with Apple and Google joining the fray.
Samsung is keeping shareholders happy at the moment by increasing dividends but this is not a lasting solution. Some analysts suggest that buying back shares this year may help the company if broader restructuring is being planned.
Other factors affecting Samsungs paltry Q2 profits include the slow uptake of 4G mobile service in China and the appreciation of the won, the South Korean currency. Chairman Lee Kun-hee's poor health also inspires unease because succession plans for the company remain unclear.
