South Korean Samsung Electronics Co Ltd is about to release an early guidance of how well it fares in the highly competitive smartphone market this Friday. Considered an off-peak quarter, the January-March period is normally a time when operating profits are smaller. Samsung, the main rival of Apple, will more likely post a 46 percent jump during the first quarter of this year as it banks on the sales of its mid-tier smartphones during this season.
According to a survey of 42 analysts by Thomson Reuters I/B/E/S, the South Korean firm has increased its quarterly operating profits to 8.3 trillion won or $7.5 billion. That figure is about 6 percent less than the company’s previous quarter profits.
While Apple is still the leading smartphone maker around the world, Samsung’s Galaxy S and Notes series are making strong headway propelling the company to the number 2 spot after Apple. As the high-end market is getting swamped with many options, Samsung is offering cheaper models like the Rex and Galaxy Pop to less affluent markets in emerging economies.
NH Investment & Securities analyst Lee Sun-tae said: “Increasing sales of mid-tier products on top of the usual solid sales of its flagship models of the Galaxy S and Note probably helped Samsung fare better than its peers. The first quarter will be the bottom of its earnings cycle for this year, and things will only get better from here as it rolls out new mobile products.”
Other than its flagship models, Samsung also offers more than 30 smartphone models that almost cover all price points that greatly helped it boosts its shipments during the first quarter of 2013. Apple’s sales on the other hand was greatly decreased.
According to analysts, Samsung may have shipped between 68-70 million smartphones during January-March period, up 30 percent from the previous quarter’s 47.8 million units.
In spite breaking a new sales record for sales during the first quarter, Samsung’s stocks fell about 3 percent. Apple on the other hand decreased its shares by 19 percent at the same time.
NO MORE RECORD QUARTERS
Samsung had been on a roll for about five quarters, setting record breaking sales quarter after quarter. But the 8.3 trillion won reported profits for the first quarter of 2013 signals the end of that roll.
But with the release of the new Galaxy S 4 later this month, analysts are again expecting that Samsung will once again create another all-time high of 9.7 trillion won.
Samsung’s mobile division is the top earner across the company’s entire range of business, earning an estimated 5.8-6.4 trillion won in the first quarter. This figure covers the entire 5.7 trillion won that the company earned in the same period.
JP Morgan analysts even reports a 6.7 trillion won profit from the company’s mobile division alone.
Samsung will report its overall profit for the first quarter on April 26.
The company, which derived about 70 percent of its overall profit from its mobile division, is keeping the company afloat. The mobile business has become a major pillar for Samsung just when Apple is no gradually decreasing its order for parts.
Lee Sun-tae from NH Investment and Securities said that Samsung’s microchip business has fallen to 80 percent of capacity following Apple’s reduced orders for chips as its iPad tablets are struggling to maintain strong sales.
Analyst Seo Won-seok of Korea Investment & Securities said that the reduced orders from Apple has affected the chip business of Samsung significantly.
Samsung delayed a construction of another chip plant late last year announcing that it would keep its investment flexible as its biggest client, Apple, is looking for a new supplier of parts and chips.