Financial News

  • 9 April 2014, 6:53

Samsung Pins Profit Hopes On New Galaxy S5

Samsung Electronics has admitted it is expecting to confirm its second consecutive quarter of declining profits, just days ahead of the global launch of its new smartphone.

The South Korean firm estimated its January-March operating profit at $7.96bn (£4.8bn) - a fall of 4.3% - in its guidance to investors ahead of the release of its full quarterly figures, due on April 25.

The figure was slightly below that expected by analysts who said the company's efforts to stave off the threat of a decline in annual profits would depend on its cost-saving measures but also the success of the Galaxy S5 - launched worldwide on Friday.

It got off to a weak start at home, with its South Korean debut marred by a temporary ban on mobile carriers selling handsets and criticism that it lacks eye-catching new features.

Underscoring the challenges, Samsung has priced the S5 about 10% cheaper than the S4 even though main rival Apple is not widely expected to update its line-up until September.

It also dialled back on marketing glitz to keep margins stable.

Pricing has become a major issue given the growing pressure from cheaper Chinese rivals in the Asian market particularly.

Its share price is nearly 12% off the record high it hit in January last year, weighed by worries over high-end market saturation and the competition from low-end phones made by the likes of Huawei.

Such headwinds may increase pressure on the company to use its cash holdings to boost languishing share prices.

The firm said in January that it would raise dividend payouts after hiking them by 79% last year.

IM Investment analyst Lee Min-hee said: "High dividends give the impression that the company is no longer growing, and the most important thing for technology companies is growth.

"Samsung has repeated this message. Given that fact, I don't think there will be a major share buyback or a dramatic increase in dividend payout."

 

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