Even Samsung feels the handset market pressure

Even Samsung feels the handset market pressure

Caroline Gabriel/Wireless Watch  |   April 14, 2014
Rethink
The latest round of quarterly results has kicked off, providing clues to the shifting sands of the smartphone market.
 
For HTC, sadly, it's business as usual, with another quarter in the red, and below analyst expectations, though the Taiwanese firm insisted that a return to profit was “imminent” and that its new M8 flagship would boost its fortunes for the rest of this year. More of a shock is the pressure on Samsung, seemingly invincible last year, but now issuing a warning of its second consecutive quarter of falling profits. And BlackBerry is not expecting to return to profit until its next fiscal year – and even then, it may be without its handsets.
 
Of course, the three-monthly comparison of financial results excludes some of the very companies which are squeezing the former kings of the market. The smartphone segment is shifting towards low cost models, creating growth for companies which do not even appear in the quarterly financial round-ups – the emerging market vendors like Micromax and Xiaomi, and the ODMs of China and Taiwan.
 
Samsung seeks to reduce reliance on devices
At least Samsung has the option of shifting its own business balance to other units. It is currently going through an internal reorganization, says Korea Times, to reduce its dependence on consumer electronics, including the Galaxy mobile range. The electronics business accounts for over 75% of its profits and revenues.
 
The Korean vendor is investing heavily in software to increase differentiation and added value for Galaxy and its media platforms. But beyond that, it also plans to increase its focus on other key businesses such as chemicals and construction, say the reports. Several separate units are being merged to increase their scale and efficiencies – for instance, Samsung SDI, which makes displays and batteries, is to buy another Samsung affiliate, Cheil Industries., which makes electronic materials and chemicals, and is a supplier to SDI.
 
For now though, Samsung is working within the CE-heavy structure that has evolved in recent years, and which is increasingly reliant on mobile devices, especially amid the decline of the TV business. For the first quarter of fiscal 2014, Samsung says it will report basically flat revenues 53 trillion won, and a 4% fall in operating profit, from 8.8 trillion won in the year-ago period, to 8.4 trillion won ($7.9 billion) – though this still-substantial figure will be somewhat above analyst estimates.
 

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