According to its Q3 2014 results, the South Korean phone maker registered an operating profit, but it has been significantly decreased by about half compared to their third quarter profit figures last year.
Samsung credits the not-so-strong sales of its smartphone line of products for the decrease in profit. While still considered a giant in mobile manufacturing, the company no doubt is beginning to feel pressure from competitors, especially those based in China. More than 60 percent of Samsung's profits are derived from smartphone sales, and when its mobile division is not performing particularly well, the profits naturally take a dip. And so is the company's stock, which is down around 15 percent this year.
The raw numbers certainly reflect that. From last year's $9.5 billion profit, this year's figure is down to just $3.8 billion. Moreover, sales of the phone maker's flagship phone, the Galaxy S5, has not exactly lived up to expectations. And even though Samsung has already released its phablet offering, the Galaxy Note 4, last month, the late timing of the release may not be enough to boost the company's overall smartphone sales for the third quarter.
Samsung did reveal in a statement that during the third quarter, shipments of smartphones are actually up. But due to the combination of high marketing costs and decreasing average selling prices of handsets, the operating margin has been affected.
Heading to the fourth quarter, Samsung is surely proceeding with caution. Fortunately for the South Korean company, its chip business is beginning to make traction. So even if its smartphone sales are weak, the profits from its memory chips could balance out its overall sales performance. Industry analysts are saying that before the end of the year, sales of Samsung's chips could exceed those from smartphones. Well, it has happened before. Back in the second quarter of 2011, the company's chip profits were more than its smartphone profits. Samsung recently announced its plan of building a $14.7 billion plant over the next three years. So maybe the shift from smartphones to memory chips may be the right move for the company.
Wirefly Is America's Most Trusted Source For All Cell Phones, Plans, TV, and Internet Deals
Wirefly offers great deals on a large selection of smartphones, cell phones, tablets, mobile hotspots, and other wireless devices for the nation's most popular carriers. Use Wirefly’s innovative cell phone and plan comparison tools to ensure you are getting the best deal on the market. Shop with confidence knowing that Wirefly wants to help you find the best prices on cell phones, cell phone plans, TV, and Internet service.