Samsung forecasts profit drop for second successive quarter, falling short of analyst projections

Samsung’s is predicting a bleak report card for the current quarter with a second successive drop in profits expected by the Korean electronics giant.

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The firm has projected an operating profit of 8.4 trillion won [£4.77 billion] for the quarter running from January to March, which will mean a drop of four per cent compared to the same quarter last year.

It is also a trifle less than the average forecast of 8.5 trillion won [£4.8 billion] made by 40 analysts polled by Thomson Reuters and a few different factors are being blamed for the drop off in profits.

Smartphones is the sector that is worrying the firm most with falling margins and slow growth as well as the ultra-competitive nature of the market beginning to take a toll on the firm’s bottom line in the days leading up to the release of its new Galaxy S5 flagship handset.

"What Samsung needs to do this year for additional growth are things like cost reduction and reducing marketing costs," said Greg Roh, an analyst with HMC Investment and Securities. "In some sense, Samsung has no way to prevent a decline in its earnings without improving internal efficiencies."

Samsung’s concerns back up the latest set of projections released by analysts IDC that showed global smartphone growth will drop below 20 per cent as smartphone shipments increase by 19.3 per cent in 2014. This is before an even more substantial decrease in the rate of growth that sees the rate reach just 6.2 per cent in 2018.

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IDC also predicts that the average price will drop from $335 [£201] in 2013 to $260 [£156] by 2018, which will be another worry for the company’s top end line of devices. This is already manifesting itself in the fact that the selling price of the Galaxy S5 is around 10 per cent cheaper than the Galaxy S4 and could easily see prices drop even further in the coming years.