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Samsung beats estimates but expects profit decline in Q1

Samsung is putting its smartphone rebound hopes on the Galaxy S6 and S6 Edge.

Samsung Electronics said Monday it expects its quarterly earnings to decline yet again as it continues to grapple with tough competition in its core smartphone business.

The South Korean electronics giant estimates its operating profit for the three-month period ending March 31 will be 5.9 trillion won ($5.4 billion), a decrease of 30 percent from the year-ago period and basically unchanged from the previous quarter. Samsung also estimates that its sales for the quarter likely fell about 12 percent year over year, to 47 trillion won ($43.2 billion).

The company’s profit estimate — released today ahead of full earnings later this month — beat the 5.5 trillion won analyst average compiled by Bloomberg.

The guidance comes on the heels of a disappointing fourth quarter, which saw the company’s operating profit decline 36 percent and the loss of its worldwide smartphone sales crown to Apple. Samsung hopes to turn things around in the coming quarters with the sales of the Galaxy S6 and S6 Edge, the new metal-body flagship handsets due to hit retailer shelves on Friday.

Samsung smartphone shipments, which have been a smaller part of Samsung’s operating profit in recent months, are being squeezed in emerging markets by low-cost handset vendors such as Xiaomi and Huawei. The company is also facing stiff competition from Apple in the market for pricey, high-end smartphones, especially since Apple in September launched two bigger-screen iPhones that now compete with Samsung’s large-screen offerings.

Samsung’s share of the global smartphone market has been shrinking, due mainly to Apple, according to a Gartner report released last month. For the final quarter of 2014, Apple took home a 20.4 percent share of worldwide smartphone sales, up from 17.8 percent during the same quarter in 2013. Over the same period, Samsung’s share of the smartphone market, on sales of 73 million units, plummeted to 19.9 percent from 29.5 percent.

In an unusual pre-earnings comment, Samsung hinted that its first-quarter performance would beat market expectations, according to Korea Times.

“There have been a lot of reports about earnings forecasts for Samsung Electronics,” Lee Joon, chief communications officer at Samsung Future Strategy Office, told reporters in Seoul on Wednesday. “It’s fair to say that we will report improved profits during the January-March period.”

Samsung shares were trading up 3.2 percent at 1.48 million won on Monday ahead of the company’s guidance release.

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