Samsung Electronics Co Ltd (KRX:005930) is sailing in troubled water these days as their Smartphone sector is suffering from a consistent bad run. High promotional activity for their phones and lower average unit prices has resulted in a 20 percent decline, amounting to 47 trillion Korean won. Samsung (KRX:005930) hasn’t been in such a jeopardy in the past years but recently they claimed that their third quarterly reports would be lower than expected. They’re figuring a 60 percent decline in the overall profit.
This is Samsung (KRX:005930)’s worst decline in over two years. The expected profit was 5.2 trillion won out of the overall 50.4 trillion won but Samsung (KRX:005930)’s estimation was too high.
Samsung (KRX:005930) has still assured its investors that the current loss will be accounted for when Samsung (KRX:005930) Galaxy Note 4 hits the market, along with the usual seasonal demand for their TV products in the same month. Samsung (KRX:005930) expects a better 4th quarter before the closing of this year. The claim looks good on paper, especially with the release of the new mighty phablet but the first impressions of the phone in South Korea suggest otherwise.
South Korean users of Note 4 have been complaining about a considerable gap between the casing and the screen, which makes the phone vulnerable to dust and liquid. The complaints were addressed by Samsung (KRX:005930) by insisted that the gap doesn’t harm the functionality and quality of the phone. That doesn’t change the fact that Samsung (KRX:005930)’s flagship juggernaut has a loophole.
Samsung (KRX:005930) Note 4 will be facing a tough competition from Apple (NASDAQ:AAPL)’s own phablet- iPhone 6 plus. iPhone 6 plus has accounted for more than 60 percent of iPhone’s sales. Also, keeping in mind the fact that Apple (NASDAQ:AAPL) made a record 10 million sales in the first week, it will be a bit tough for Samsung (KRX:005930) to beat that sort of dominance. Samsung (KRX:005930) celebrated Note 3’s achievement, of 10 million sales in 60 days last year but comparing the numbers between Samsung (KRX:005930) and Apple (NASDAQ:AAPL), one can only wish Samsung (KRX:005930) the same success this year as well.
Galaxy 4 has some improved features from its predecessor but would that be enough to tame down the onslaught inflicted by Apple (NASDAQ:AAPL)? Would it be enough to please the customers that are looking for something new and exciting? Lower end companies like Huawei and Lenovo are moving into Samsung (KRX:005930)’s domain. How will Samsung (KRX:005930) survive a coup if such lower end companies continue to succeed?
Now with devices like iPhone 6 and the Apple (NASDAQ:AAPL) Watch single handedly sweeping the market, Samsung (KRX:005930) will have to come up with something so extraordinary that it eclipses the grandeur of the aforementioned products. Samsung (KRX:005930) must also keep an eye on the Chinese lower end companies, especially those who are now associated with Google (NASDAQ:GOOGL)). But most of all, Samsung (KRX:005930) should make sure Galaxy Note 4 does good business when it is launched.