Samsung predicts grim earnings this quarter amid latest dramatic revenue drop

The global economic volatility has been largely blamed for the downturn of the premium smartphone market, as tech giant Samsung fights to break even

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As earlier forseen, Samsung Electronics is the latest tech giant to struggle to take a bigger bite out of its key products in a consolidated fourth quarterly revenue.
 The South-Korean tech giant today reported financial results ending December 31, 2018 and the fiscal year 2018. The Company posted KRW 59.27 trillion (R767.55 billion), down 10 percent from the previous year, and KRW 10.8 trillion (R139.86 billion) in quarterly operating profit, down 29 percent. 

However, it’s not all doom and gloom as sales figures for the rest of 2018 have gone slightly up with a reported KRW 243.77 trillion (R3.156 trillion) in revenue and KRW 58.89 trillion (R762.63 billion) in operating profit. That’s a significant increase from the 2017 financial results, which clocked up KRW 53.65 trillion in operating profit.

While the company has enjoyed record profits in recent years despite a series of setbacks, including a significant market share lost late last year, the latest sales figures suffered largely due to increasingly fierce competition in the smartphone market. Take for an example Huawei and Xiaomi, which offer quality devices at lower prices, resulting in both considerably closing the gap with Apple and in some cases surpassing it.

Profits decline due to weak seasonality

Samsung blamed the fourth quarter earnings downturn to “the drop in demand for memory chips used in data centres and smartphones,” the global market leader in computer chips and smartphones said in a statement.

The System LSI and Foundry businesses also saw profits decline “due to weak seasonality,” and so did the overall earnings at the Display Panel business, as well as the IT & Mobile Communications (IM) division. “However, the Networks Business reported gains on the back of 5G equipment installations and expansion of LTE networks,” further read the statement.

The latest results are a far cry from third quarter earnings – ending in September – with recorded operating profit of 17.57 trillion won (about $15.5 billion). That’s a 21 percent jump from the year earlier.

Mobile sales are likely to improve thanks to planned launch of Galaxy S10 among others

Looking ahead, Samsung expects overall annual earnings for 2019 to decline due to weaker performance of some of its products. That said, earnings in the IM Division are likely to improve in the first quarter, helped by the planned launch of the new flagship Galaxy smartphone (Samsung Galaxy S10 & S10 Plus and the foldable Galaxy X).

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Tankiso Komane
A Journalism graduate from the Tshwane University of Technology, Tankiso Komane has a vast experience in print & broadcast media business and has worked for some of the country’s biggest daily newspapers, including The Sowetan, The Citizen, The Times, and The New Age. Through her varied work as a journalist, notably as a copywriter for SABC1 (On-Air promotions) and as a publicist for Onyx Communications, she has developed an in-depth understanding of the nature of the media business and how to use it for the purpose of exposure. Her expertise in journalism, coupled with a good reputation, is what laid the foundation of the business philosophy adapted by NowInSA, a subsidiary of LeisureNews Networks.

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