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Samsung is back to black

by on06 October 2015


But investors are unlikely to cheer

Samsung is expected to announce its first annual increase in quarterly profit in two years following a dismal third quarter in 2014, but word on the street is that things are not going well.

Samsung's July-September operating profit to have risen 64 percent marking the first pickup since a record profit in the third quarter of 2013, but investors are not exactly excited.

Most of Samsung's problems are its phone business. Though overall phone shipments likely rose, the brokerage says the greater share of lower-end products and price cuts for the Galaxy S6 models weighed heavily on the company's bottom line.

At the lower end it launched new products targeting markets such as India, while at the high end it switched from plastic to metal, introduced curved screens and cut the price for its flagship Galaxy S6 devices after sales fell short of high expectations in the second quarter.

The smartphone market is saturated and no one is selling that many anymore. Chinese makers have eaten up its lower end market. New hardware features can be quickly matched by rivals. Samsung lacks service or software offerings that can pique consumer interest and not easily be replicated, a problem it hopes its recently launched Samsung Pay service can help address.

None of this has convinced investors that the company is back on track for sustained growth and the sustained growth is likely soon. The company is under pressure to return some of a cash pile of $53 billion through dividends or share buybacks.

Samsung's semiconductor business probably remained its top earner for the fifth straight quarter as new premium phones came to market.

Last modified on 06 October 2015
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