Samsung Electronics likely to continue earnings decline

Samsung Electronics, the nation’s top electronics company, is expected to rattle the market on Tuesday by announcing a second consecutive earnings decline for the third quarter due to weak sales in its core smartphone business amid rising competition, stock analysts said Sunday.

According to financial research firm FnGuide, Samsung Electronics’ operating profit in the July-September period is forecast to record 4.98 trillion won ($4.65 billion), which is less than half of 10.16 trillion in the same period last year. Operating profit slid to 7.20 trillion won in the second quarter from 8.49 trillion won in the previous three months.

Some local brokerage firms issued a dim outlook for the electronics giant’s third-quarter earnings, projecting less than 3 trillion won.

“Unlike some reports, the company’s operating profit for the third quarter will not drop to the 3 trillion mark thanks to better-than-expected performance in the device solutions sector,” a Samsung spokesman told a local daily on Sunday.

Skepticism remains on whether the firm will be able to make a smooth recovery in the fourth quarter amid pressure to deliver a revamped product lineup that can boost sales.

Analysts say that Samsung is no longer enjoying the golden days in its smartphone businesses as its Chinese rivals such as price-competitive Xiaomi and Huawei are gradually changing the market landscape, while Apple continues to serve the high-end market.

“Sales of the iPhone 6 lineup have been growing at a fast rate, which worries Samsung on its large-screen smartphones. Being sandwiched between Chinese products and Apple will only worsen its profitability,” Daewoo Securities said in its recent report.

Meanwhile, Samsung’s home appliance business is struggling with slowing TV sales.

In the same period, Samsung’s semiconductor businesses are forecast to receive rave performance reviews, led by the flourishing DRAM chips and NAND flash chips.

In contrast with growing concerns over Samsung’s future growth, Samsung president Lee Don-ju, who oversees the mobile phone operations, said last week during the Galaxy 4 World Tour in Seoul that the mobile division is forecast to make a quick recovery in the fourth quarter.

“The latest smartphone woes are only temporary. Samsung will pick up pace again due to its strong base in technical innovation,” Lee said.

Shares of Samsung closed at 1,141,000 won on Thursday, down 22.4 percent from the yearly high of 1,470,000 won recorded in June.

By Suk Gee-hyun (monicasuk@heraldcorp.com)