Samsung Q2 profits record high, pushed by S4

Samsung Name

The Samsung Galaxy S4 propelled the South Korean firm to record earnings for Q2 2013 to US$8.9 billion, but even after five consecutive record quarterly profits, analysts are wondering what will happen to Samsung with narrowing margins now that rivals are flooding the market with cheaper smartphones. They have even downgraded the stock value 3-percent because of this. Maybe that is why the root of analyst is “anal,” just a thought I throw out for you to ponder.

Brian Park, an analyst at Tong Yang Securities says:

Earnings could improve further from here as Samsung could cut prices of the S4 to boost overall shipments to a level that offsets any decrease in selling prices. But the bigger issue is that there’s not much clarity about its future product lineups, and smartphones are increasingly commoditized … It’s inevitable that Samsung’s stellar profit growth will come to an end and stagnate starting from next year.”

Samsung is still the world’s top smartphone manufacturer with over 33-percent share versus Apple’s 17.9-percent, and while its portfolio ranges from high-end to lower end, competition is heating up in China, the largest mobile market. China manufacturers, Huawei and ZTE, are making ground with some nice smartphones for the money, which will make Samsung’s (and other manufacturers) work harder to keep their sales numbers up in developing countries, since 70-percent of Samsung’s total profits are generated by the mobile industry.

Mozilla’s Firefox software will be running on smartphones from Deutsche Telekom and Telefonica for less than US$100. They are manufactured by TCL Communication and ZTE and easily allow developers to create apps using the popular HTML5 format.

Fortunately, for Samsung, much of their “mobility” generating income is derived from chip sales, both processors and memory. There is certainly a solid recovery in memory chips – Dynamic random access memory (DRAM) chips, used mainly in computers has jumped nearly 90-percent this year and NAND chips used in mobile devices to store data is expected to be in short supply.

Samsung is the top maker of Smart TVs, handsets, displays, and memory chips, as well as a major manufacturer of processors for electronic devices, and major appliances. Samsung is well diversified among its products and the industries, so if one falters, there is usually another area that picks up. I think the analysts talk too much doom and gloom, although Samsung does need to map out some sort of strategy for its smartphone and tablet series. They are large enough to make a multitude of devices to fill every niche, but they would be better served, in the long run, to narrow their models to a few really good products or to be creative enough to create a niche, such as they did with the phablet, the Galaxy Note series.

Source : Reuters