Samsung Electronics Forecasts Q1 Profit Decline, But May Be Poised For Recovery

Samsung Electronics just issued its earnings guidance for the first quarter, and once again the company, which has seen its smartphone sales eroded by increasing competition, said it expects another drop in operating profit.

Samsung Electronics said it expects 1Q2015 operating profit of 5.9 trillion won (about $5.4 billion), or a 30 percent year-over-year decline. This doesn’t reverse the slide in the company’s earnings over the last 18 months, but at least it is better than the decline expected by analysts polled by Dow Jones

Samsung Electronics also said that it expects revenue of 47 trillion won (about $43.3 billion), or a 12.4 percent drop from the previous year.

As companies like Xiaomi ascend, sales of Samsung Electronics’ smartphones have suffered. In its 4Q2014 earnings report, the company disclosed that mobile sales accounted for just 58 percent of Samsung’s total operating profit last year, a noteworthy decline from 70 percent in 2013. It also said that it expected smartphone sales to continue to drop in the latest quarter.

Samsung Electronics has been busy trying to climb back on top of the smartphone market (or at least recover somewhat) with the Galaxy S6 and Galaxy S6 edge, the first time that the company has released two versions of its flagship phone at the same time.

The two smartphones are made with glass and metal, which Samsung decided to use materials after previous versions of the smartphone, which were produced in plastic, got a barrage of criticism for being unattractive and feeling cheap.

There are signs that the company will go on the defensive this quarter as it tries to shore up its smartphone business. For example, Samsung took the unusual step yesterday of responding to a YouTube video by extended-warranty provider SquareTrade criticizing the durability of its phones by issuing its own video, as well as a detailed defense.

Furthermore, Samsung Electronics also held a press briefing about its 1Q2015 earnings guidance last week, which was notable because the company very rarely comments on its quarterly forecasts.

During the briefing, Samsung Future Strategy office chief communications officer Lee Joon told reporters “there have been a lot of reports about earnings forecasts for Samsung Electronics. It’s fair to say that we will report improved profits during the January-March period.”