J
Jeff Causey
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Samsung Electronics issued guidance earlier this week suggesting operating profit fell a stunning 18 percent during the fourth quarter of 2013 compared to the third quarter. This is not the position the company wanted to be in, which sees two-thirds of its profits from smartphones, as it braces for Apple’s entry into the Chinese market. Rumors also abound that Apple is (finally) working on larger screens for their smartphones to be able to better compete in the market. Samsung suggested 2013 will go down as the year with the weakest profit growth for its smartphones since they started making them in 2007.
Samsung suggested at least part of the reason for the decreased profit is a special bonus paid to employees as part of the 20th anniversary of a “New Management” strategy implemented by Chairman Lee Kun-hee. Analysts suggest the payouts were much larger than anticipated, in the 300 to 700 billion won range ($282 – $658M USD). Increased marketing costs are believed to have also had a negative impact on smartphone profits.
Samsung is estimated fourth quarter sales will be 59 trillion won ($55B USD) compared to a forecast of 61 trillion won ($57B USD). Profits are now estimated at 8.3 trillion won ($7.8M USD) which would be the lowest level since the third quarter of 2012.
source: Reuters
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