Samsung expects massive drop in third-quarter profits

Samsung has revealed its expectations for its third-quarter earnings and has warned that operating profits could be around 60 per cent down on second-quarter figures.

Profits are estimated to be around the 4.1 trillion won mark, just under $4 billion or £2.5 billion, compared to 7.19 trillion won (approximately $6.7 billion or £4 billion) for the previous quarter.

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The South Korean company is blaming lower average selling prices of its smartphones for the drop and the emergence of several, more affordable competitors suggests that this decline may be set to continue.

For example, Chinese start-up Xiaomi offers high-end Android devices (the same operating system used in Samsung's flagship Galaxy smartphones) that contain similar features to Samsung models for around half the price.

Nokia is also focusing on budget smartphones with its Lumia range and forms part of the growing competition that Samsung is facing in emerging markets.

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Add to this the new competition from high-end devices such as Apple's iPhone 6 and iPhone 6 Plus, both of which have incorporated larger screens to compete with Samsung devices and one can start to see why profits may be falling.

This situation is similar to the one Samsung faced last quarter and it will be interesting to see how it responds to the financial figures when they are officially announced.

Do you think Samsung can stop the rot? Let us know in the comments section.