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Samsung warns of profit drop in early 2011, iPad blamed

updated 08:35 am EDT, Thu April 7, 2011

Samsung profit to drop 42pc in early 2011

Samsung warned Thursday that its operating profit for winter 2011 would drop at least 42 percent compared to a year ago. It expected to make between $2.48 billion to $2.84 billion, a steep fall off from the roughly $4.06 billion it made at the same point in 2010. Officials didn't explain the drop and said more would have to wait for its full results in late April.

Dongbu Securities analyst Lee Min-hee, however, blamed the iPad as a core factor. Samsung is likely to have faced a slump in LCD sales, both because of low TV sales but also through a drop in notebook sales as end users switched to tablets.

More directly, there was "severe price competition" with Apple, Lee said. Along with repeated cuts to the Galaxy Tab's price at carriers, the company had to price the Galaxy Tab 8.9 and 10.1 at or below Apple's iPad 2 pricing. It had planned to charge a premium for the 10.1 under the flawed assumption that Apple would have to charge more for the iPad 2's dual-core processor and cameras.

The analyst expected Samsung to bounce back in the spring, in part because the Japanese earthquake was triggering higher prices for memory and seeing companies stock up on LCDs in the event supply ran short too quickly.



By Electronista Staff
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Comments

  1. SergioRS

    Fresh-Faced Recruit

    Joined: Sep 2004

    +8

    Nelson Muntz says:

    "ha ha!"

  1. hayesk

    Professional Poster

    Joined: Sep 1999

    +9

    Skapegoat

    So what if they didn't release the tablet at all? Sure they had to cut prices, but does that mean it's not a profitable product? Samsung makes lots of other products that don't compete with Apple. I suspect the profit drop reaches beyond their tablet division.

  1. iphonerulez

    Fresh-Faced Recruit

    Joined: Nov 2008

    +9

    Most of these tablet vendors are merely out

    to prove they can take Apple down at any cost. It's a very stupid way to run a business. Samsung could easily sit back and just supply Apple with raw components rather than throw away money trying to break Apple's tablet domination. Apple is running a marketing machine that most companies can't touch. 300+ Apple retail stores is really just too much to go up against as is iTunes.

  1. JeffHarris

    Fresh-Faced Recruit

    Joined: Oct 1999

    +5

    But I thought...

    Samsung supplied displays, memory and processors for Apple's iOS devices? I would imagine Samsung makes SOME money in that capacity.

    (And nobody wants their Galaxy Tabs? Imagine that!)

  1. lkrupp

    Junior Member

    Joined: May 2001

    +9

    Bottom line...

    Apple has completely disrupted the business models and profit structures of some really big companies and they are having difficulty dealing with the new world order created by iOS devices. Apple has been incredibly proactive in gobbling up component supply chains thereby creating the "severe price cometition" mentioned in the article. When you've got really great product PLUS really great price structure that's a tough to crack for any competitor, even one of the big boys like Samsung.

    The people running Apple now are always looking over thier shoulders to see who's gaining on them and that's a good thing!

  1. jpellino

    Fresh-Faced Recruit

    Joined: Oct 1999

    -1

    Apparently

    "iPad"
    is French for
    "We can't innovate our way out of an open paper bag."

  1. mytdave

    Fresh-Faced Recruit

    Joined: Aug 2000

    +1

    hogwash

    I don't know why their profits would drop off so drastically or if it's really true, but I don't think it can be blamed on the iPad. Quite the opposite I would think. Samsung makes tons of semi-conductor parts for the iPad. They're probably happy about how well it's selling. It's not like Samsung ever had a tablet of their own before the 1st iPad came out, so it's not like they're losing any sales to Apple.

    What do analysts know. They seem to do a lot of talking, and I've never noticed them to be very accurate. There has to be some other explanation. I would say the largest factor is probably the economy, which, on main street, hasn't really improved any.

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