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Samsung Q4 operating profit plunges 18%

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South Korea's Samsung posted Friday an 18 percent drop in operating profit in the fourth quarter, due to a one-off bonus and slowing sales of the electronic giant's high-end smartphones.

Operating profit stood at 8.3 trillion won ($7.8 billion), down 18 percent from the July-September period, marking the company's first quarterly profit decline in two years.

The fourth quarter figure was also down 6.0 percent from a year ago.

The world's top maker of mobile phones and TVs said earnings were hit by a "negative currency impact" of 700 billion won and a one-off 800 billion won employee bonus to mark the 20th anniversary of a marketing strategy by Chairman Lee Kun-Hee that laid the groundwork for the company's recent success.

"For the first quarter it will be challenging for Samsung to improve its earnings as the weak seasonality of the IT industry will put pressure on demand for components and TV products," the company said.

A model holds Samsung's first 'curved' smartphone Galaxy Round  a 5.7-inch handset wi...
A model holds Samsung's first 'curved' smartphone Galaxy Round, a 5.7-inch handset with a display that is slightly rounded on both sides, at the Electronics and IT Industry Fair in Goyang, north of Seoul, on October 10, 2013
Jung Yeon-Je, AFP/File

The latest earnings result ended the company's long run of record quarterly profits on the back of surging sales of its flagship Galaxy series smartphones.

The mobile division posted a quarterly operating profit of 5.47 trillion won, down 2.8 percent from the third quarter.

The company statement said the division's earnings were down due to seasonally increased marketing costs, as well as the one-off bonus.

The strength of the Korean won against other currencies also weighed on performance, inflicting foreign-exchange losses and making Samsung less price-competitive in the global market.

Operating profit for the whole of 2013 was 36.8 trillion won, up 27 percent from the previous year.

Samsung had a leading share of 38.8 percent in the global smartphone market as of the third quarter of last year, followed by arch-rival Apple's 13.1 percent, according to the industry research firm IDC survey.

But its bottom line has been hit by competition from budget handset makers, especially from China, and the company faces a fresh challenge this year after Apple struck a distribution deal with China Mobile Ltd., the world's biggest carrier by users.

Samsung commanded more than an 18 percent share of China's smartphone market as of the third quarter last year, according to Chinese consultancy Analysys International, while Apple sat in eighth place with just 3.5 percent.

Samsung's display division, which dominates the global market for LED panels, posted an operating profit of 110 billion won in the fourth quarter, down 90 percent from the previous year.

Slowing Galaxy S4 smartphone sales increased the inventory of unsold displays, while weaker TV sales also impacted the division.

South Korea’s Samsung posted Friday an 18 percent drop in operating profit in the fourth quarter, due to a one-off bonus and slowing sales of the electronic giant’s high-end smartphones.

Operating profit stood at 8.3 trillion won ($7.8 billion), down 18 percent from the July-September period, marking the company’s first quarterly profit decline in two years.

The fourth quarter figure was also down 6.0 percent from a year ago.

The world’s top maker of mobile phones and TVs said earnings were hit by a “negative currency impact” of 700 billion won and a one-off 800 billion won employee bonus to mark the 20th anniversary of a marketing strategy by Chairman Lee Kun-Hee that laid the groundwork for the company’s recent success.

“For the first quarter it will be challenging for Samsung to improve its earnings as the weak seasonality of the IT industry will put pressure on demand for components and TV products,” the company said.

A model holds Samsung's first 'curved' smartphone Galaxy Round  a 5.7-inch handset wi...

A model holds Samsung's first 'curved' smartphone Galaxy Round, a 5.7-inch handset with a display that is slightly rounded on both sides, at the Electronics and IT Industry Fair in Goyang, north of Seoul, on October 10, 2013
Jung Yeon-Je, AFP/File

The latest earnings result ended the company’s long run of record quarterly profits on the back of surging sales of its flagship Galaxy series smartphones.

The mobile division posted a quarterly operating profit of 5.47 trillion won, down 2.8 percent from the third quarter.

The company statement said the division’s earnings were down due to seasonally increased marketing costs, as well as the one-off bonus.

The strength of the Korean won against other currencies also weighed on performance, inflicting foreign-exchange losses and making Samsung less price-competitive in the global market.

Operating profit for the whole of 2013 was 36.8 trillion won, up 27 percent from the previous year.

Samsung had a leading share of 38.8 percent in the global smartphone market as of the third quarter of last year, followed by arch-rival Apple’s 13.1 percent, according to the industry research firm IDC survey.

But its bottom line has been hit by competition from budget handset makers, especially from China, and the company faces a fresh challenge this year after Apple struck a distribution deal with China Mobile Ltd., the world’s biggest carrier by users.

Samsung commanded more than an 18 percent share of China’s smartphone market as of the third quarter last year, according to Chinese consultancy Analysys International, while Apple sat in eighth place with just 3.5 percent.

Samsung’s display division, which dominates the global market for LED panels, posted an operating profit of 110 billion won in the fourth quarter, down 90 percent from the previous year.

Slowing Galaxy S4 smartphone sales increased the inventory of unsold displays, while weaker TV sales also impacted the division.

AFP
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With 2,400 staff representing 100 different nationalities, AFP covers the world as a leading global news agency. AFP provides fast, comprehensive and verified coverage of the issues affecting our daily lives.

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