Weak GS4 sales and expensive marketing leads to Samsung earnings miss

[Dari]

Here is the Dailytech article.

But I didn't start this thread to rag on Samsung. Instead, I made it to rag on the smartphone OEMs. Samsung is now in the same patch as Apple has been the past year. With the two largest OEMs in the industry reporting less than expected sales, and everyone else struggling in their own special way, it's obvious things are slowing down for smartphone makers. Do you think we have reached a saturation point? Maybe people are tired of spending $200/year on these phones? Could that be why Google is coming out with very inexpensive phones in order to take marketshare away from Apple AND Samsung (Google has to pay Apple and Samsung for directing traffic to its sites)? I know some people here like to brag about changing their phones as often as they change their underwear, but those phones are not disappearing into the ether. Instead, someone else is picking them up and using them for years.

So, what do people think will happen to the OEMs? I think innovation has reached a plateau on the hardware front so they may continue to hurt. Any opinions?

 

[bradly1101]

1080P in a five inch screen is a great accomplishment, but can my eyes discern the difference between that and 720P? Are the video and photo increased file sizes worth it on a device this size?

Where's my 4K phone??

 

[jacktesterson]

1080P in a five inch screen is a great accomplishment, but can my eyes discern the difference between that and 720P? Are the video and photo increased file sizes worth it on a device this size?

Where's my 4K phone??

I have an Optimus G and Xperia ZL in my pocession. There is a noticable difference between 720p and 1080p, mostly with Text being always sharper and easier on the eyes. Otherwise - its nowhere near the step from qHD to 720p

 

[dawheat]

I caveat this with an - until the next true innovation arrives and shakes up the entire market.

It's amusing how quickly Apple and Samsung have found themselves in the same position. Record profits, still growing, but facing saturation in the high end market. Between them, they've taken all the profit out of the entire industry and left crumbs for everyone else. The doom and gloom around Samsung after banking a record 8.38 billion in quarterly profit is nearly Apple-esque. The status quo at the top end will continue between Apple and Samsung.

The low end will get dominated by the Chinese as their quality and software improve. The middle players like HTC and Sony will see meager profits indefinitely or until they abandon the high end market.

The HTC vs Samsung quarterly results said it all. Despite rave review and a launch quarter, HTC barely eaked out a profit again.

 

[Germanic]

Samsung is pretty much in the same situation that Apple was in last year.

Samsung still posted record-breaking profits but it missed analyst's expectations. Much better than posting a decline in profits and not missing analyst's expectations. It's a good sign that Samsung is still growing rather than receding.

Last time I checked, Apple in Q1 posted a decline in profits and that sent its share price diving.

Analysts' expectations usually inflate all earnings estimates and usually are a false guidance.

All in all, Samsung still makes 95% of Android's profits, with the rest going to LG and a minority going everywhere else.

The Samsung Galaxy S4 is selling fine at 20 million in the first one and a half months. The biggest threat to Samsung is actually Apple, everyone else is pretty insignificant. Even LG, the next biggest player in Android smartphones only got 2.5% of total Android profit share. That's pretty insignificant.

Why does Samsung make the most profits? Because marketing hypes it up. There is some marketing hype for LG with the new Optimus G Pro advertisements in the World Baseball Classic. There is no hype for HTC or Sony because they can't afford marketing and will certainly remain this way as these companies are relatively smaller and don't have enough money for marketing.

Apple of course makes the most profits from smartphones (about $1 billion or $2 billion more than Samsung). A minor but still significant difference.

 

[grkM3]

Samsung is killing it in advertising! I got the new jay z album (whole thing) for free 3 days before release because Samsung bought and paid for a million copy's to give out to galaxy phone users.

They just blew more money in that as HTC does for its whole marketing campaign and Samsung last year blew 4 billion in marketing.

They had like 5 min of Superbowl time and now I'm starting to see free advertising for Samsung as a bunch of regular commercials are using galaxy phones in them and not even a cell phone commercial.

The guy saying nooo at the wedding watching the game on a gs4 and thinking its a galaxy commercial ends up being a grilling hot dog one.

The price line negotiator is another that comes to mind.the girl is using a gs4 in that one also

And Dari we all know you hate Samsung and your true intentions of this thread.

These stupid blogs are just made for page vews.yeah Samsung slowed down normal gs4 sales because it added a gs4 mini,a gs4 active,gs4 zoom and the new gs4 advanced.

Why don't these analyst add the whole galaxy s4 line up together and mention that Samsung with its galaxy brand owns 95% of the android ecosystem and made 8 billion in PURE profit last quarter on top of its massive marketing budget.

 

[Jodell88]

^^ He just posted the news. http://www.bbc.co.uk/news/business-23192664

 

[dawheat]

The point though is growth is slowing for everyone in the high end market and Samsung will have to adapt or see their stock suffer like Apple, even though both companies are pulling in unbelievable profit today.

I think either the praise or criticism of Samsung will be validated in the next 18 months by how they respond

 

[lopri]

If advertising and marketing determine sales, one would think Windows Phones should have picked up a bigger piece of pie? I see their ads most often on TV.

 

[WelshBloke]

The point though is growth is slowing for everyone in the high end market and Samsung will have to adapt or see their stock suffer like Apple, even though both companies are pulling in unbelievable profit today.

I think either the praise or criticism of Samsung will be validated in the next 18 months by how they respond

Samsung are a bit more varied in their product line than apple. What % of samsungs profit comes from their phone type gadgets?

Also does their stock price matter that much if they keep making a profit? Neither company is that open to listening to shareholders.

 

[dawheat]

Samsung are a bit more varied in their product line than apple. What % of samsungs profit comes from their phone type gadgets?

Also does their stock price matter that much if they keep making a profit? Neither company is that open to listening to shareholders.

I've heard 75% of the profit is based on smartphones which is massively disproportionate based on their revenue.

It's relative - Apple wouldn't have increased their buyback and dividends if they didn't feel significant pressure not from retail investors but institutional.

 

[Commodus]

Analysts tend to freak out unnecessarily (many of them expect companies to grow quickly forever), but I think we're seeing evidence of a problem at Samsung: it doesn't really know what to do when it's out in front.

The GS4 is an improvement over the GS3 and a fine phone, but it's so conservatively designed that it makes the iPhone 5 look like a revolution in comparison. Then there's the software, which has many new features that only half-work or need other GS4s (air gestures, Group Play and so on). It feels like Samsung is already on cruise control, doing the minimum it needs to stay on top. Treating smartphones the way it does washing machines.

That's a bit dangerous for Samsung, because it hasn't fostered a culture of loyalty like Apple has. People rarely queue up for Samsung launches without an incentive; the company takes a very clinical "if we just spend enough, people will buy" approach to marketing. While the Next Big Thing ad campaign is a breath of fresh air, it ironically points out that Samsung rarely triggers that line-around-the-block fervor. One major flub and customers could flock to whatever's next from Apple, HTC or LG.

 

[grkM3]

Analysts tend to freak out unnecessarily (many of them expect companies to grow quickly forever), but I think we're seeing evidence of a problem at Samsung: it doesn't really know what to do when it's out in front.

The GS4 is an improvement over the GS3 and a fine phone, but it's so conservatively designed that it makes the iPhone 5 look like a revolution in comparison. Then there's the software, which has many new features that only half-work or need other GS4s (air gestures, Group Play and so on). It feels like Samsung is already on cruise control, doing the minimum it needs to stay on top. Treating smartphones the way it does washing machines.

That's a bit dangerous for Samsung, because it hasn't fostered a culture of loyalty like Apple has. People rarely queue up for Samsung launches without an incentive; the company takes a very clinical "if we just spend enough, people will buy" approach to marketing. While the Next Big Thing ad campaign is a breath of fresh air, it ironically points out that Samsung rarely triggers that line-around-the-block fervor. One major flub and customers could flock to whatever's next from Apple, HTC or LG.

The only thing ironic is Samsung was leading the android pack since the galaxy s2 and never looked back.the gs2 had no marketing and neither did the galaxy nexus and Samsung was the number one android market leader since the launch of the gs2.

Samsung started its marketing with the gs3 and got big way before the gs3 ever came out.the gs2 was the number one selling android phone for its time and Verizon(USA biggest carrier) did not even sell it.

I hate how people think Samsung got where its at over night and did it with pure marketing

 

[Commodus]

The only thing ironic is Samsung was leading the android pack since the galaxy s2 and never looked back.the gs2 had no marketing and neither did the galaxy nexus and Samsung was the number one android market leader since the launch of the gs2.

Samsung started its marketing with the gs3 and got big way before the gs3 ever came out.the gs2 was the number one selling android phone for its time and Verizon(USA biggest carrier) did not even sell it.

I hate how people think Samsung got where its at over night and did it with pure marketing

Oh, I knew they've been a big phone producer for years. But there's big, and then there's "arguably dictating where the cellphone industry is going" big. That's what Samsung got from the GS3 launch. Some of that was due to marketing, I'd say. Samsung had the advantage of being a major Olympics sponsor, and the Next Big Thing campaign was its first real attempt at a big US media blitz.

 

[Dari]

Samsung are a bit more varied in their product line than apple. What % of samsungs profit comes from their phone type gadgets?

Also does their stock price matter that much if they keep making a profit? Neither company is that open to listening to shareholders.

The answer is in the article. Samsung makes more of their profit from their smartphones compared to Apple. Apple also makes more (money compared to Samsung) from less.

And the problem is far worse for Samsung than Apple because, as sales slow, that is made worse exponentially since Samsung is vertically integrated. They make most of their own stuff. So when sales suffer, the shockwave is felt throughout the whole conglomerate. For Apple, they just have to buy less components (their suppliers suffer). So, yeah, a slowdown for Samsung could be catastrophic for the entire firm and no shareholder wants to be holding their stock when that happens.

 

[Germanic]

The answer is in the article. Samsung makes more of their profit from their smartphones compared to Apple. Apple also makes more (money compared to Samsung) from less.

And the problem is far worse for Samsung than Apple because, as sales slow, that is made worse exponentially since Samsung is vertically integrated. They make most of their own stuff. So when sales suffer, the shockwave is felt throughout the whole conglomerate. For Apple, they just have to buy less components (their suppliers suffer). So, yeah, a slowdown for Samsung could be catastrophic for the entire firm and no shareholder wants to be holding their stock when that happens.

This is completely wrong.

You need to look at the entire electronics industry to get an idea of what's happening:

• DRAM prices are gradually increasing due to increasing demand and this means bigger profits for Samsung, SK Hynix and Micron.
  
• Samsung Electronics is only one part of the entire Samsung group: there's also Samsung Heavy Industries (shipbuilding), Samsung Techwin (military surveillance, robotics and cybernetics), Samsung Health, Samsung Construction, Samsung Insurance, etc
  
• Apple is the one in trouble: Smartphone market will plateau very soon and Apple is much less diversified than Samsung
  
• You just need to see Apple's stock performance since September 2012. Their shares are worth $400... that's way off target from analysts' expectations of $1000 per share
  
• Samsung is diversified and their Heavy Industries sector is very profitable (they are the world's 2nd biggest shipbuilder after Hyundai Heavy Industries).

And what's the other side effect if Apple sells less smartphones than expected? Less profits. Yes Apple will order less components from their suppliers (duh), but that means less profits because the less they sell, the less profits they make. For example, if the profit margin of an iPhone 5 is $5 then there is a huge difference between selling 10 million and selling only 1 million. It's that simple.

And here's an article for you to get a reality check my anti-Samsung friend, Dari:

Samsung’s meltdown is nothing like Apple’s
http://bgr.com/2013/07/05/samsung-share-price-analysis/

Brian Marshall of ISI, per CNN Money, noted that shares of both Apple and Samsung reached close to record highs after the launches of their flagship smartphones. Samsung’s stock meltdown is nothing like Apple’s, however. Shares of Samsung stock are still up nearly 20% since January 2012, while Apple’s stock is up less than 5%, after rising more than 70% by last September.

Marshall’s comparative chart follows below.

The Apple iPhone 5S is going to be released soon. I'm not sure if that will help Apple.

 

[Dari]

This is completely wrong.

You need to look at the entire electronics industry to get an idea of what's happening:

• DRAM prices are gradually increasing due to increasing demand and this means bigger profits for Samsung, SK Hynix and Micron.
  
• Samsung Electronics is only one part of the entire Samsung group: there's also Samsung Heavy Industries (shipbuilding), Samsung Techwin (military surveillance, robotics and cybernetics), Samsung Health, Samsung Construction, Samsung Insurance, etc
  
• Apple is the one in trouble: Smartphone market will plateau very soon and Apple is much less diversified than Samsung
  
• You just need to see Apple's stock performance since September 2012. Their shares are worth $400... that's way off target from analysts' expectations of $1000 per share
  
• Samsung is diversified and their Heavy Industries sector is very profitable (they are the world's 2nd biggest shipbuilder after Hyundai Heavy Industries).

And what's the other side effect if Apple sells less smartphones than expected? Less profits. Yes Apple will order less components from their suppliers (duh), but that means less profits because the less they sell, the less profits they make. For example, if the profit margin of an iPhone 5 is $5 then there is a huge difference between selling 10 million and selling only 1 million. It's that simple.

And here's an article for you to get a reality check my anti-Samsung friend, Dari:

Samsung’s meltdown is nothing like Apple’s
http://bgr.com/2013/07/05/samsung-share-price-analysis/

The Apple iPhone 5S is going to be released soon. I'm not sure if that will help Apple.

I think you're the one that's wrong. Again, Samsung Electronics DOMINATES the Samsung group. It's the moneymaker for the group. The other parts of the conglomerate don't make as much, if any, money compared to Samsung Electronics. Look at their numbers. It's not hard to figure out. And this is an Asian conglomerate. If history is right, the other parts of the organization are mainly "trophy" sectors and don't really integrate well with each other. Instead, they're there to suck money from the real moneymakers; because the company wanted to hedge its bets; or because regulators looked the other way. Either way, the other components are not a primary focus and the numbers bare that out. When a conglomerate starts to suffer, those non-core assets will be the first to go.

 

[grkM3]

Dari you are wrong once again and we discussed this in another Samsung thread where I showed you all of Samsung's other market caps and its huge(biggest in the world) oil rig they just built

Samsung just struck a deal to build 2 more oil rigs


http://www.globalpost.com/dispatch/...y-bags-us13-bln-offshore-drill-platform-order


Samsung Heavy said two or three jack-up rigs are expected to be placed every year through 2020. They are emerging as one of the new revenue sources for shipbuilders.

 

[MichaelBarg]

You guys are missing the real story because you're so focused on Samsung and Apple. Those two are the only two smart phone manufacturers who are not in trouble. The rest (LG, Sony, Nokia, Blackberry, Motorola, HTC, etc.) are barely making any money as a group. As the market matures their chances for taking share are shrinking. I think half of them will be out of the business within 5 years, and the only two I'm sure won't be gone are Samsung and Apple.

 

[grkM3]

You guys are missing the real story because you're so focused on Samsung and Apple. Those two are the only two smart phone manufacturers who are not in trouble. The rest (LG, Sony, Nokia, Blackberry, Motorola, HTC, etc.) are barely making any money as a group. As the market matures their chances for taking share are shrinking. I think half of them will be out of the business within 5 years, and the only two I'm sure won't be gone are Samsung and Apple.

On that note let's not forget that Samsung is making higher profits from its other markets than all of these electronic companies combined and you can also add amd and nvidia in the mix as well

 

[dawheat]

You guys are missing the real story because you're so focused on Samsung and Apple. Those two are the only two smart phone manufacturers who are not in trouble. The rest (LG, Sony, Nokia, Blackberry, Motorola, HTC, etc.) are barely making any money as a group. As the market matures their chances for taking share are shrinking. I think half of them will be out of the business within 5 years, and the only two I'm sure won't be gone are Samsung and Apple.

I agree - Samsung and Apple are the only players who can confidently say, that regardless of the macro-environment, they'll be banking tens of billions in profit this year. Slowing growth or not, they're gonna be alright.

The second tier players are the most at risk if the pie stops growing and competition gets even hotter for the remaining customers. They don't have war chests like the big 2 to compete.

 

[grkM3]

I agree - Samsung and Apple are the only players who can confidently say, that regardless of the macro-environment, they'll be banking tens of billions in profit this year. Slowing growth or not, they're gonna be alright.

The second tier players are the most at risk if the pie stops growing and competition gets even hotter for the remaining customers. They don't have war chests like the big 2 to compete.

They will be merged or bought out by the big 2 and I know Samsung is def interested in sharp as they just bought a bit of that company to keep them alive for there screen building fabs

 

[poofyhairguy]

Analysts tend to freak out unnecessarily (many of them expect companies to grow quickly forever), but I think we're seeing evidence of a problem at Samsung: it doesn't really know what to do when it's out in front.

People seem to like Samsung's "eye features," and I think many will follow suite with Samsung pushing on health apps and extra sensors.

You guys are missing the real story because you're so focused on Samsung and Apple. Those two are the only two smart phone manufacturers who are not in trouble. The rest (LG, Sony, Nokia, Blackberry, Motorola, HTC, etc.) are barely making any money as a group. As the market matures their chances for taking share are shrinking. I think half of them will be out of the business within 5 years, and the only two I'm sure won't be gone are Samsung and Apple.

Good point.

Samsung will stay. Apple will stay. Google will make Moto stay.

BB's probably dead, as is Nokia, and probably HTC eventually (the One was a year too late).

Sony is the wild card I guess. They have been doing good in Europe, but are no where in America till this year.

 

[MrX8503]

There's a possibility that there's saturation in the high end. Maybe that's why Apple is making a plastic iPhone and many other competitors are working on an iWatch.

I think everyone is looking for that next big thing. It was smartphones then tablets, and now the market is up for grabs again.

 

[jpeyton]

I think half of them will be out of the business within 5 years, and the only two I'm sure won't be gone are Samsung and Apple.

There's a reason that Apple and Samsung are hoarding nearly all the profit:

1) Both have succeeded at marketing their "brand", but in different ways. Apple has stuck to the "less is more" marketing strategy to make iPhone a premium brand. Samsung has spent billions to lift the Galaxy brand name above the sea of similar competing Android phones.

2) Both are masters at controlling the supply chain, but in different ways. Apple is a whiz at securing long-term deals with component suppliers well in advance of the rest of the market. Samsung just happens to be part of the same conglomerate that owns component suppliers in every major category (screens, batteries, SoC, memory, storage, imaging, etc.).

But there are no sinister forces at play here. Apple and Samsung have earned their dominant position. HTC and Blackberry will be dead or absorbed in 2 years time. Sony and LG are large enough brands that they can continue to survive, even at low profit. ZTE and Huawei are wild cards, and I think both will actually be highly profitable for years to come buoyed entirely by the gargantuan Chinese smartphone market.