Bad results but the whispers have already done the damage.
- Samsung reported preliminary Q4 results that disappointed but forecasts but whisper numbers had already taken this into account.
- Between Christmas and Jan 3 the stock has already fallen nearly 10%.
- Q4 Revenues / Operating Income were KRW58tn-KRW60tn with operating income at KRW8.1-KRW8.5tn.
- This is 4% below the consensus revenue estimate at KRW61.5tn and 20% below the consensus operating profit estimate of KRW10.5tn.
- Part of the miss was due to higher than expected bonus payouts of KRW700m but this can only account for a small part of the miss.
- Taking out the bonus effect, it looks like there has been softness in Samsung’s most profitable products.
- I suspect that the combination of greater competition causing pricing pressure and some share losses to Apple were responsible for the weakness in profitability.
- This matches what is likely to be a good quarter from Apple and some softness in the market for high end smartphones.
- These devices have very high margins and weakness causes a disproportionately large impact on margins as we have seen today.
- If this trend is to continue in 2014 it is going to cause some real problems.
- Samsung’s earns fantastic margins on these products and it is these margins that are enabling it to have time to invest in developing its own ecosystem.
- The company recognises that it must do this in the long –term if it wants to earn a better-than-commodity margin on its consumer products.
- However, if this margin trend continues then Samsung’s window will be much shorter raising the possibility that handset margins go back to 10% or lower before it can get its ecosystem house in order.
- Samsung has a tricky time ahead and although the stock is cheap the fan base will not get re-enthused unless earnings can start growing again.
- I prefer both Yahoo! and Microsoft to Samsung in 2014.
Blog Comments
Tim Nash
January 7, 2014 at 4:18 pm
Now that Chinese and Japanese smartphone manufacturers have improved their offerings, Samsung will find it difficult to sell premium Android phones in those markets. According to BCN, the highest placed Samsung phone in December was in 31st place in Japan.
The Android market is commoditising much more rapidly than did PCs and without consumer loyalty Samsung won’t continue to dominate, so Tizen won’t get traction.
windsorr
January 8, 2014 at 6:11 pm
Japan doesent surprise me..however it is miniscule when it comes to the global market and is VERY insular when it comes to these sorts of things.
Definitely commoditising very quickly…question is can Samsung hang on through its advantages..my confidence is falling…
tatilsever
January 10, 2014 at 9:33 pm
PC market also commoditized during its mid-cycle of adoption, where many countries had local brands who relied heavily on contract manufacturers for design and production. They competed on the basis of better marketing or better relationships with the local distributors, retailers and government procurement processes. “Perfect competition” means sale prices just above cost and tiny profits do not leave any safety margin for missteps, so eventually most of them left the field and the industry went through a consolidation. Its profits margins may erode compared to the initial go-go days, just like Apple’s did, but when that consolidation phase arrives, Samsung will be among the few well placed companies to be left standing.
Tim Nash
January 8, 2014 at 7:58 pm
In Japan, Samsung used to do well on DoCoMo, which has about 70 million mobile contracts. In December, according to BCN, its best model was behind Apple (14 iPhone variants), Sony, Sharp, Panasonic, Kyocera and Chinese phones from ZTE and Huawei.
For premium phones, I believe Samsung’s best hope is holding on to a good share in the EU5.
Samsung – Home on the range. | Radio Free Mobile
January 27, 2014 at 10:41 am
[…] has a window (see here) to move to the next phase of its development but the window is narrower than I had previously […]