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Samsung sees contraction in profit for the first time in two years

updated 08:40 pm EST, Thu January 23, 2014

Company claims next quarter likely to see similar contraction

As expected, Samsung has posted its first drop in quarterly profits in nine quarters, and simultaneously warned that it would face another challenging quarter for growth in the first quarter of 2014 due to contracting demand. The company's profit fell six percent year-over-year to 8.3 trillion won ($7.7 billion), meeting its own expectations.

The company blames the drop in growth on a one-off 800 billion won ($745 million) employee bonus fund it established, and also a stronger Korean won exchange ratio to the US dollar, which the Korean manufacture claims cost it 700 billion won. Investor analysts believe reduced orders for components from Apple, along with increased pressure from the iPhone maker's iOS platform success -- particularly in tablets -- in the larger markets is also hurting the company's growth rate.

"It will be challenging for Samsung to improve its earnings in the first quarter as the weak seasonality of the IT industry will put pressure on demand for components and TV products," the company said in a statement, speaking towards the post-holiday season and the continued poor global economy. The world's largest cellphone manufacturer remains buoyed by good results from mobile products, holding steady from the last quarter at 5.47 trillion won. Results are still down from the July-September record profit of 6.7 trillion won, likely attributable to the release of new Apple handsets in October of 2013.

Samsung's display unit saw profit plummet 90 percent to 110 billion won. The fall in profit from that division is attributed to less-than-expected sales of the Galaxy S4, leaving phones in inventory, as well as the previously-mentioned television set weakness.



By Electronista Staff
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