Samsung Electronics is the world’s largest tech manufacturer in sales, but the problem with being at the top, is it is easy to slip down. While they are still probably the market leader when it comes to devices, the company has announced today that their profits have taken a serious hit in the past 3 months.
The company has released its final earnings in the 3 months leading up to June 30, and they have come as a shock to investors. Total earnings came in at 7.2 trillion won ($7.1 billion) for this period, a drop of 24% on the same period in 2013, and considerably less than the 8 trillion won which was generally anticipated by shareholders.
But what exactly has caused such a significant draw-down in revenues for the South Korean company?
Samsung is primarily laying the blame on stronger than anticipated competition in the Chinese market. Here local manufacturers such as Huawei and Xiaomi have made considerable inroads in terms of sales and brand recognition. In addition, the company believes that the cycles of new phone purchases in Europe and Asia are working against the company, and this has caused a ‘glut’ of smartphone inventories in these markets. Furthermore, they theorise a stronger-than-usual Korean Won may have hurt their sales figures.
Recent offerings by the company have been seen as less than inspiring.
But what of the reasons they don’t talk about? While the Galaxy S1 through to S3 were stand-out devices in terms of Android, more recent offerings by the company have been seen as less than inspiring. This has, in turn, created conditions where rivals in the high-end smartphone business, such as HTC, LG and Sony, have managed to catch up to Samsung, and produce equally good, if not better phones.
In addition, Samsung’s somewhat heavy-handed attempts to force users into its own ecosystem of apps, through its TouchWiz Android skin, have been met with a poor reception. Primarily, the problem here is that this software is poorly optimized, laggy and hard to navigate, and gives rise to the theory that Samsung puts more importance on its profits than its user experience.
Clearly, Samsung is far from financial ruin, but this latest earnings report should be setting alarm bells off within the company. As most of the company’s massive earnings gains in recent years have been due to high end smartphone sales, Samsung will need to reinvent its Galaxy S lineup in order to win back wavering consumers. In addition, it should continue with its aggressive sales approach in the wearables sector, and keep producing products until it achieves a similar ‘hit’ product, like the original Galaxy S.
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