By Min-Jeong Lee And Jonathan Cheng
SEOUL-- Samsung Electronics Co. offered signs Thursday that the
worst was likely over for its mobile division, as the company turns
to mobile chips and cheaper handsets to spur a recovery in
profit.
Samsung said that fourth-quarter net profit fell to 5.35
trillion Korean won ($4.9 billion), down 27% from a year earlier
and marking a third straight quarter of net profit decline, as the
smartphone giant's mobile profit plunged from a year earlier.
The slide came amid intense competition. Data from researchers
showed Samsung lost significant smartphone market share in key
markets including China following rival Apple Inc.'s launch of
bigger screen iPhones in September last year that sold well
globally.
Data tracker Counterpoint Technology Market Research said that
Samsung fell to fifth place among handset manufacturers in China in
the fourth quarter, with just 9% of smartphone sales. A year
earlier, Samsung had 17% of the market, but has been surpassed by
market leader Apple, as well as domestic rivals Xiaomi Corp.,
Lenovo Group Ltd. and Huawei Technologies Co.
However, Samsung managed to limit the damage to profit margin at
the company's mobile division, which clocked in at 7.5%. While that
is a far cry from the almost 20% profit margin that the mobile
division enjoyed for several years, it is a slight improvement on
the previous quarter's 7.1%.
The 27% decline in fourth-quarter net profit from a year earlier
was also an improvement from the 49% year-over-year slump the
company suffered in the third quarter.
The company is pinning its hopes on new phones and processing
chips in smartphones to limit the damage as it readies its new
flagship phone launch.
Analysts forecast a modest recovery in the company's bottom line
this year on demand for its memory chips and processors.
The South Korean technology giant could start rolling out a
successor to its Galaxy S5 model as early as March, analysts say,
in an attempt to bolster smartphone sales.
A large number of new model could come equipped with an
internally designed mobile processor, according to a person
familiar with the matter, unlike previous models that relied
heavily on processors from Qualcomm Inc. This will help the company
lift its mobile profit--albeit modestly--as well as the company's
chip unit that makes mobile processors, analysts say.
The company has also been expanding its production of low-cost
phones by pouring billions of dollars into building and expanding
factories in Vietnam, as well as enlarging a cellphone
manufacturing plant in the northern Indian city of Noida.
The Indian facility will oversee production of Samsung's new Z1
smartphone, which is the first to be powered by its homegrown
operating system Tizen, an alternative to Google Inc.'s Android
platform.
At the same time, the company lifted its 2014 dividend by 40%,
its latest move to appease shareholders and government regulators
who have been calling on South Korea's biggest companies to loosen
their grip on their cash hoards. Samsung had about $60 billion in
cash at the end of the third quarter.
Fourth-quarter operating profit fell 36% to 5.3 trillion won on
an 11% drop in revenue at 52.7 trillion won, Samsung said. The
figures were in line with the company's previous guidance.
Analysts estimate Samsung shipped 74 million to 77 million
smartphones in the fourth quarter, down from an estimate of 86
million units a year earlier from Strategy Analytics.
Rival Apple sold 74.5 million iPhones in its fiscal first
quarter, up 46% from a year earlier.
Samsung didn't disclose mobile shipments.
Write to Min-Jeong Lee at min-jeong.lee@wsj.com and Jonathan
Cheng at jonathan.cheng@wsj.com
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