Samsung’s Earnings Lower On Lagging Smartphone Sales

The company is boosting production of the S6 Galaxy Edge after reportedly misjudging demand.
Katie Kuehner-HebertJuly 7, 2015
Samsung’s Earnings Lower On Lagging Smartphone Sales

Samsung Electronics expects to post lower-than-expected earnings for the second quarter due to lagging sales of its Galaxy S6 and Galaxy S6 Edge smartphones, according to a Wall Street Journal story on Monday.

The Seoul-based technology company said it expects to earn 6.9 trillion Korean won ($6.1 billion) in operating profit for the three months ending June 30, a 4% decline from the second quarter of 2014. Revenue was expected to fall 8.4%, to 48 trillion won.

“The disappointment underscores the perils of navigating the fast-changing smartphone market: Even with a hit product on its hands, the South Korean company appears to have misjudged demand,” the WSJ wrote.

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Samsung initially set up its production facilities to accommodate more sales of its Galaxy S6 smartphones than its Galaxy S6 Edge by a 4:1 ratio, but demand for the two models launched in April actually ended up being roughly equal, a person familiar with the matter told the WSJ. That led to a glut of unsold Galaxy S6 devices — particularly white-colored devices — and not enough Galaxy S6 Edge smartphones.

The company in April said it would boost production of that model to meet demand by the end of June, and now expects overall sales and profit figures to pick up again in the third and fourth quarters. For the second quarter, analysts estimate the company shipped 71 million to 76 million smartphones, with the Galaxy S6 series phones accounting for slightly more than 20% of the shipments.

“It remains unclear whether Samsung may have missed its window of opportunity with consumers, however,” the WSJ wrote. “Unlike rival Apple, whose iPhones tend to sell well even a year after they are first introduced to the market, Samsung’s flagship smartphone sales have historically peaked in the first few months after its launch.”

The second quarter miss would be Samsung’s seventh consecutive quarter of year-over-year declines.