Feeling the squeeze: Samsung under pressure as giant forecasts 6% profit drop

Feeling the squeeze: Samsung under pressure as giant forecasts 6% profit drop

Korean mobile giant Samsung has projected a 6 percent year-on-year drop in operating profit for its October to December 2013 quarter, with commentators claiming the firm is under pressure from all angles.

In an pre-earnings guidance published ahead of its full results, the company claimed it expects sales to come in at 59 trillion Won (around $55 billion) – that's up 5 percent on the same period in 2012.

However, Samsung believes operating profit will come in at 8.3 trillion Won (around $7.8 billion) – that's down 18 percent from the previous quarter and down 6 percent from the 8.86 trillion Won ($8.3 billion) operating profit it amassed in the same quarter in 2012.

The price is wrong

Samsung itself hasn't given a reason for the profit dip, but analysts are citing falling profit margins on smartphone handsets, given the company's revenue is actually up.

Increasing competition from Apple, Nokia and HTC, they claim, is forcing Samsung to remain competitive on price.

As a result, the company is preparing itself for its weakest growth in smartphone profit for seven years, with the value of its shares falling 10 percent across the Christmas period - wiping $19 billion off its market value.

Apple's much-publicised assault on China may also be having an impact, with Samsung having enjoyed a larger share of the Asian market than its American competitor up until recently.

While Apple too is facing pressure from investors to make a greater impact in the East, any gains the company makes in the region will likely come at Samsung's expense.

Samsung's full quarterly figures will be released later this month.

[source: Samsung]

With a fine eye for detail, Keith Andrew is fuelled by strong coffee, Kylie Minogue and the shapely curve of a san serif font.


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