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With Q2 performance below expectations, has Samsung finally peaked?

by On July 5, 2013
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Has Samsung reached its peak? Or is everyone just expecting too much?

Last month, Samsung’s market capitalization was reduced by an alarming $25.3 billion, a figure that is greater than the total value of Sony Corp. This was after the sales of the company’s latest flagship smartphone turned out to be lower than what investors expected. Now, as the company prepares to present its second quarter results on July 26, can the company put an end to its declining market capitalization?

Earnings report

In a preliminary statement released Friday, Samsung said that the company is expecting to have made around 9.3 to 9.7 trillion won ($8.2 billion to $8.5 billion) for the company’s second financial quarter. This is lower than what analysts estimated. Based on polls made by Bloomberg and Thomson Reuters I/B/E/S, the average of analysts’ forecasts is around 10 trillion won ($8.7 billion).

Still, the reported earnings figure is a significant rise from last year’s 6.46 trillion won ($5.7 billion). It represents a 44 to 50 percent increase, although lower than the 54 percent growth achieved during the first quarter.

The company made sales of around 56 to 58 trillion won ($49.1 to 51 billion), an 18 to 22 percent rise from last year’s sales figure for the same quarter. These numbers are close to the 58.6 trillion won ($51.3 billion ) average made by 38 analysts surveyed by Bloomberg.

Samsung did not provide a breakdown of the earnings for the company’s different divisions. Also, net income numbers were not released but are expected to be presented later within the month as audited.

Effect on Samsung shares

As much as Samsung tried to make its earnings expectations look good with high percentage increases in sales and income, the company’s shares still went down by more than 3% on Friday. Apparently, investors are not convinced that the earnings growth Samsung posted is enough.

As of Friday’s announcement from Samsung, the company’s market capitalization has already dropped by 17%, which translates to $34.2 billion. This is now more than the total value of both Sony Corp and LG Electronics Inc.

The S4 factor

Koreans and other East Asians consider the number 4 unlucky, and analysts are saying that the reason for Samsung’s disappointing sales is mainly its latest flagship, the Galaxy S4 or the Galaxy SIV as Samsung would like to have it written.

Despite winning an award for its environmentally-friendly components, having the smallest dimensions among 5-inch flagships, and showing considerable improvement with its Super AMOLED display, the Galaxy S4 is viewed as a weak successor. It also does not help that it closely resembles the Galaxy S3, making some users feel like they have not had an upgrade. The S4 is not a revolutionary device but it certainly is one of the best on the market at present.

Via: Android Authority

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