This article is more than 1 year old

Peak Samsung: Bottom line walloped in Chinese mobe, slab war

Q4 profit down '37 per cent' ... but that's still a tidy £3.1bn

Cheap slabs and smartphones from Chinese brands are taking a toll on the once seemingly unstoppable tech sales machine Samsung Electronics as it forecast a year-on-year crash in Q4 profit.

The chaebol warned in a preliminary earnings guidance message that operating profit will be more than 37 per cent lighter on the same period a year earlier at 5.2trn Korean won (£3.14bn, $4.75bn).

Sales for the final quarter of 2014 are expected to reach 52trn won ($47bn, £31bn), a rise of 10.6 per cent year on year, Samsung Electronics said.

This profit slide is hardly a crisis for the family business, and is higher than the 5trn Korean won anticipated by analysts, which led to a slight spike in the share price today.

But the less positive development caps off a challenging year for Samsung in which it shelled out to write-down tablet stock it failed to sell.

As we exclusively revealed, in the UK alone there were 300,000 Galaxy slabs sat in warehouses waiting for a new home, and smartphones were also similarly challenged.

Efforts to price protect stock for distributors dented profits in Q2, with Samsung stating at the time it was hit by “slow global sales of smartphones and tablets and escalating marketing expenditure to reduce inventory.”

Samsung did not indicate if clearing stock is still to blame for the drop in profit, but demand for tabs went from bad to worse last year, so it is not unfeasible this played a part.

Shipments of tablets grew 11 per cent, year on year, to 216 million units in 2014, a far cry from the high double digits percentages of 2013, and will remain “slow” this year, according to Gartner crystal ball strokers.

In the smartphone market, Chinese vendors now comprise three of the top five biggest sellers worldwide, as consumers opt for lower cost devices. ®

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