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27 February 2024

Samsung mimics Apple (again): Warns of difficult 2016

By Reuters

Tech giant Samsung Electronics Co on Thursday warned of possible weaker earnings this year due to softer sales of gadgets such as smartphones, a trend that is also hurting rival Apple Inc. and major chipmakers.

The South Korean firm’s warning came a day after Apple shares fell more than 6.5 per cent, the biggest percentage drop in two years, as the iPhone maker forecast its first quarterly sales drop in 13 years.

Slowing economic growth in China and weaker emerging market currencies are undercutting sales of electronics ranging from televisions to personal computers, spelling trouble for not only for Samsung and Apple but for their suppliers and the broader industry.

“Broadly weaker IT demand will make it difficult to maintain 2016 profits at the level of the previous year’s,” Samsung said in a statement accompanying its fourth-quarter results, adding that “challenging business conditions” would remain for the current quarter and last throughout the first half of this year.

Samsung said its October-December operating profit was 6.1 trillion won ($5.05 billion), matching its earlier guidance. Revenue rose 1.1 per cent to 53.3 trillion won, slightly better than the 53 trillion won it guided for.

The maker of Galaxy smartphones and tablets reported a full-year operating profit for 2015 of 26.4 trillion won, compared with 25 trillion won the previous year.

Samsung shares were down 2.4 per cent as of 0322 GMT (6.22am UAE time), underperforming a 0.2 per cent rise for the broader market.

Some investors and analysts believe Samsung will see its profit fall for the second time in three years in 2016, as slack demand for gadgets undercuts prices of memory chips and displays that helped to offset declining mobile profits last year.

The semiconductor division was the top earner for the sixth straight quarter in the October-December period, lifting its operating profit to 2.80 trillion won from 2.70 trillion won a year earlier.

Mobile division profit slipped 7.3 per cent from the third quarter to 2.23 trillion won, its weakest result in four quarters. Samsung said first-quarter mobile profits would improve slightly, boosted by the launch of new smartphones, although overall smartphone shipments were expected to decline slightly.

Separately, Samsung said it planned to buy back and cancel 2.99 trillion won worth of common and preferred shares, marking the second round of share purchases as part of a 11.3 trillion buyback plan announced late last year.

The firm would also pay a year-end dividend of 20,000 won per share.