Samsung’s smartphone sales slide

Samsung has posted a second quarterly fall in profit, as its smartphone sales slid 4%.

Samsung's smartphone sales slide

A revival of sales of smartphones is crucial for Samsung to sustain growth, as its mainstay mobile business, which generated three fourths of its first-quarter profit, reported its first smartphone market share loss in four years.

It’s renvenue in the division slid 4% to 33.4 trillion won (£23.3 billion), although adjustments to one-off expenses boosted profit by 18%.

Samsung said handset shipments in the second quarter should be similar to 113 million seen in the January-March period, though smartphones such as the Galaxy S5 should make up more of the April-June shipments.

Samsung continues to face tough competition from Apple at the higher-end of the smartphone market and from Chinese brands like Huawei at the lower-end

“Samsung is expected to see profits rally in the second quarter and beyond, on the back of improved sales of display panels and home appliances,” Samsung said in a statement.

Samsung is now banking on its premium Galaxy S5 handset, launched earlier this month, to outsell its predecessor and widen profit margins, a senior executive told Reuters earlier.

The end of the heyday of smartphone innovation has left Samsung – which posted five straight record quarterly profits until the first quarter of 2013 – facing its first annual profit fall in three years, according to analysts polled by Reuters.

The firm’s broad range of low-end phones is being caught by the improving quality of Chinese-made offerings, while the large-screen advantage of its top-end phones is expected to come under threat from Apple’s next iPhone.

“Samsung continues to face tough competition from Apple at the higher-end of the smartphone market and from Chinese brands like Huawei at the lower-end,” said Neil Mawston, of research firm Strategy Analytics.

Any further decline in profitability could increase shareholder pressure on the company to produce a new growth engine or lift payouts, though the company offered few details about how it will use the 61.5 trillion won worth of cash and other equivalents held at the end of the first quarter.

For January-March, Samsung said operating profit fell 3.3% from a year earlier to 8.5 trillion won (£4.9 billion), versus guidance of 8.4 trillion won.

Profit in the mobile division was 6.43 trillion won, down 1.2% from 6.51 trillion won a year earlier.

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