Samsung’s profit sinks 39%as mobile profit shrinks

SEOUL (TIP): Samsung Electronics Co. said its first-quarter net income has plunged 39%as the smartphone business saw its profit shrink to less than half from a year earlier.

The company reported Wednesday that its January-March income was 4.63 trillion won ($4.35 billion), compared with 7.49 trillion won one year earlier.

That was lower than analysts’ consensus of 4.97 trillion won, according to financial data provider Factset.

Sales fell 12% from a year earlier to 47.12 trillion won while operating income dropped 30% to 5.98 trillion won, in line with Samsung’s earnings preview earlier this month.

The wider-than-expected drop in net profit was due to a big profit plunge in Samsung’s mobile business. The maker of Galaxy smartphones said its mobile division generated 2.74 trillion won in quarterly profit, compared with 6.43 trillion won a year earlier.

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Analysts estimate Samsung sold more smartphones than Apple during the quarter but the Korean firm lost its share in the high-end market to Apple after the maker of the iPhone began offering models with bigger screens last fall.

Apple on Tuesday reported that it sold 61 million iPhones in the quarter, which drove another quarter of blow-out profits.

Samsung, which does not disclose its smartphone shipments, is estimated to have sold 81 million smartphones during the quarter according to analysts. But most of the sales increase came from mid-level handsets like the Galaxy A series, which are sold at a cheaper price than its flagship models.

The Korean company said its profits will increase during the second quarter as the Galaxy S6 and S6 Edge with curved screens expand sales after their global launch this month. But the shipments of those high-end phones will not be big enough to offset decreased sales of middle- to low-end models. Marketing expenses will also go up, pressuring its profit margin.

The only business that saw an improvement in profit during the first three months of this year was Samsung’s component division that supplies chips and displays for makers of smartphones and televisions, including Apple Inc. Samsung’s consumer electronics division that makes television sets turned unprofitable, losing 140 billion won during the quarter.

Looking ahead, Samsung said its overall earnings will increase during the second quarter from the previous three months, as sales of premium smartphones such as its Galaxy series as well as the iPhone drive demand for its semiconductor products and display panels.

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