Samsung Profit Decline Slows Down

On Tuesday, Samsung Electronics delivered another piece of evidence that the recent slide in its profit has moderated as the company is preparing for the launch of its next flagship smartphone; the much-awaited Samsung Galaxy S6. According to the consumer electronics giant, in the quarter that ended March 31st, the firm will be reporting an operating profit of about $5.4 billion. This is a 30.5% decline from last year in the same period. Nonetheless, the final results will be revealed by the firm later in this month. This decline in operating profit is representing a fall in operating profit for the sixth consecutive year-over-year quarter.

But, as compared to the decline in the fourth quarter of 2014 that was about 36%, this is a slower year-over-year decline, which had been 60% greater in the third quarter of last year. Apart from that, the official guidance is also a shade better than the forecast made by a Dow Jones Survey of eight analysts, who had predicted it to be about 35%. Majority of the analysts expect an improvement in Samsung’s earnings through the sales of not just the Galaxy S6, but also its curved version, the Galaxy S6 Edge, which will commence in the second quarter.

Analysts are expecting the two products to outsell the older flagship devices of the company, which would be immensely useful in lifting the firm’s profit margins and market share. As per the estimates given by experts, the South Korean giant is expected to sell 57 million units of both smartphones this year and about 38 million units of the previous flagship model, the Galaxy S5. It was also stated by analysts that the semiconductor business of the firm has also been a constant source of strength for it even though there was a decline in its mobile fortunes and it may have contributed to the boost in earnings in the first quarter.

In order to balance the steadily declining demand for its Galaxy range of handsets, the smartphone giant intends to increase the adoption of metal frames in various upcoming models and to take a step away from the plastic bodies that it has depended on for so long. While the rugged, lightweight and plastic frame was praised by the firm, most consumers considered it as cheap looking. It has been suggested by executives that after a bruising last year, the firm intends to go on the offensive as the profit margins of the company declined amidst intense competition from Apple Inc. and a couple of Chinese handset makers.

The mobile division of the company had profit margins of 20%, but they declined to 10% in the past few quarters. It has been promised by executive margins that they will give margins a boost in the low double-digit percentage points soon. So far, the new smartphones of the firm have received positive reviews and the company’s share price has also seen an increase in anticipation of the sales of the smartphones. After declining for two years, the firm’s stock price has increased by 11%. 

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