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Samsung Electronics on Thursday posted its first quarterly decline in operating profits in two years, stung by softening smartphone sales and a one-time employee bonus.
The South Korean electronics giant recorded an operating profit of 8.31 trillion won ($7.73 billion) for the quarter ended December 31, its first decline since 2011 and an 18 percent drop from the previous quarter’s record earnings. Its revenue for the quarter was 59.3 trillion won.
While in line with guidance Samsung offered earlier this month, the South Korean electronics giant’s fourth-quarter operating profit came in below analysts’ average expectation of 10 trillion won.
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Samsung’s mobile unit, which traditionally provides two-thirds of the company’s profits, recorded a fourth-quarter operating profit of 5.47 trillion won, an 18 percent decline from the record 6.7 trillion won profit the division posted in the third quarter. The company also faces increased competition in the China market due to Apple’s deal with wireless giant China Mobile, which began selling the iPhone 5S and 5C last week.
“A flood of Asian rivals from China and India, such as Lenovo, as well as a product refresh from Apple, are pressuring Samsung at the moment,” Neil Mawston, an executive director at researcher Strategy Analytics, told Bloomberg. “The upcoming Galaxy S5 smartphone will help to stabilize profits, but it is unlikely to regrow them in such a crowded market.”
The company’s next-generation flagship Android handset is expected to ship in March or April, according to the company’s mobile-products leader. The S5 will be released a year after the S4, along with a successor to the Gear smartwatch that’ll be less bulky and have more advanced features, Young-hee Lee, executive vice president of marketing for Samsung’s mobile division, told Bloomberg News earlier this month.
Meanwhile, the company’s display division recorded an operating profit of 110 billion won in the fourth quarter, compared with 1.11 trillion won in the year-ago quarter. Operating profit declined at Samsung’s consumer electronics division, falling to 660 billion won from 740 billion won a year ago.
The company also reported that it paid an 800 billion won bonus to employees last quarter to commemorate Chairman Lee Kun-hee’s new management strategy, a move that reignited shareholder demands for an increased dividend yield. In keeping with South Korean corporate tradition, Samsung keeps its dividend around 1 percent.
