Local brokers cut estimate for Samsung's Q3 profit

Local brokerage houses have sharply revised down their estimate for the third-quarter operating income of Samsung Electronics Co., citing weak performance in the smartphone sector, an online financial information provider said Wednesday.

South Korea's 27 brokerage houses estimated Samsung's operating profit for the July-September period at 6.98 trillion won ($6.85 billion), hovering far below the 8.6 trillion won outlook made in July, the data compiled by FnGuide showed.

The figure is also 31.2 percent lower than the 10.1 trillion won posted in the third quarter of 2013. In the second quarter this year, the tech giant saw its operating profit come to 7.19 trillion won, plunging 24.6 percent from the previous year, amid the poor returns from its mainstay handset business.

A handful of South Korean securities firms expected the world's No. 1 maker of smartphones will post an operating profit in the 5 trillion won range for the third quarter, with Hyundai Securities Co. suggesting 5.91 trillion won and Shinhan Investment Corp. casting a 5.97 trillion won outlook.

The slowing returns from Samsung's key smartphone business have been emerging as a major drag on its earnings outlook, analysts said.

Samsung earlier said operating profit of its IT and mobile business division, the company's main revenue source, fell 29.6 percent on-year to 4.42 trillion won in the second quarter from6.28 trillion won a year earlier.

The rising presence of Chinese players has also been cited as a major reason for Samsung losing ground in the mobile division, as they rapidly narrowed the gap with traditional leaders in the low-end sector.

While Samsung is set to showcase its new phablet, presumably the Galaxy Note 4 in Berlin on Wednesday, analysts anticipate the move will have little effect on the company's earnings for the third quarter.

"(Samsung's) competition with Chinese players, such as Xiaomi, is intensifying," said Kim Young-chan from Shinhan Investment, adding it is also difficult to expect a growth momentum in the second half.

Shares of Samsung Electronics also suffered on the main bourse in line with the gloomy outlook, closing at 1,194,000 won Tuesday, falling below the 1,200,000 won for the first time in two years.

The firm reached its peak on Jan. 3, 2013, when it soared to 1,584,000 won. (Yonhap)