Samsung Q3 profit misses estimates

As a sign of intensifying competition in the smartphone business, Samsung Electronics has guided for a plunge of around 60% in its third quarter operating profit.

Samsung ad
Source: Bloomberg

Samsung expects to post a Q3 operating profit of between 3.9 trillion won ($3.6 billion) and 4.3 trillion won ($4.0 billion), nearly half the 10.2 trillion won from the previous year.

The company blames the drop on higher marketing costs and lower selling prices.

It should come as no surprise to most investors. Indicators over the past few months have showed that the South Korean tech giant has been losing market share in the phone business in key markets such as China. The mobile division accounts for nearly two thirds of its profit.

Investors have already been selling off shares in Samsung over concerns about its outlook. The stock price is down over 15% year-to-date.

In the near term, things aren’t looking too rosy with the company warning that the fourth quarter’s outlook will be uncertain. That’s despite the launch of a new flagship handset Galaxy Note 4 and Note Edge during the quarter.

The upside is that Samsung appears to be making plans to grow its semiconductor business. On Monday, it announced plans to build a $15 billion chip factory by 2017. This will allow it to tap on the growth of sectors such as wearables, the Internet of Things, and ride on the wider smartphone boom regardless of which phone maker wins.

Click to enlarge

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.