Commentary

Samsung Likes The Direction Its Numbers Are Taking

On the eve of the favorably received Samsung Galaxy S6 rollout Friday, the company released preliminary first-quarter results yesterday with earnings that were better than analysts expected. The move had the apparently intended effect of observers commenting that its business is catching some wind (even if it’s still in the doldrums).

“The consumer electronics giant said it expects to report about 5.9 trillion Korean won ($5.4 billion) in operating profit for the quarter ended March 31, a decline of 30.5% from the same period a year earlier,” write Min-Jeong Lee and Jonathan Cheng in The Wall Street Journal

“The decline would represent the sixth consecutive year-over-year fall in quarterly profit,” they report. “However, it is slower than the 36% year-over-year decline in the fourth quarter of 2014 and a 60% plunge in the quarter before that.”

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Full quarterly results will be released later this month.

“Samsung did not give a breakdown of its financial performance but analysts said robust demand for its mobile chips and improvements in its smartphone business were behind the relative improvement,” reports the AP’s Youkyung Lee.

“The guidance comes on the heels of a disappointing fourth quarter, which saw the company's operating profit decline 36%and the loss of its worldwide smartphone sales crown to Apple,” observes CNET’s Steven Musil. 

“After criticism that its phones look cheap and are too complicated to use, Samsung ditched plastic, using aluminum and glass for the new flagship smartphone's body,” the AP’s Lee’s writes. “The company also removed many apps that were installed on the phones that critics said cluttered screen space without being useful.”

“The preliminary views of the Galaxy S6 are pretty positive. It is significantly classier than Galaxy S5 so people are thinking it will probably do fairly well,” Edward Synder, co-founder and managing director of Charter Equity Research told CNBC, Ansuya Harjani writes

Reuters’ Se Young Lee reports “researcher Counterpoint expects Samsung to sell more than 50 million units of the new devices to consumers this year — a new record for the company.” And, continues Lee, “the contribution from Samsung's chip-making division is also tipped to be just as significant as smartphone-related income.”

“I think the reason Samsung struggled last year is they just looked boring,” BNP Paribas analysts Peter Yu tells the New York Times’ Paul Mozur, pointing out that there was little difference between the 2014 and 2013 Galaxy models. 

“Everyone caught up,” Yu said. “When it came to Android phones everything now just looks the same. If you cover up the brand, you couldn’t tell the difference between the Chinese smartphones and the Samsung smartphones.” 

Ben Thompson, an independent technology analyst at Stratechery.com, is “skeptical,” however, telling Mozur in an email that Samsung is “testing the thesis that phone quality matters. My thesis is that it’s the software that gives Apple its lock on the high end (plus brand).” 

Adding to the optimism, Samsung will manufacture the main chip in Apple’s iPhone 9, “regaining a customer previously lost to Taiwan Semiconductor Manufacturing Co., people with direct knowledge of the matter” told Bloomberg’s Jungah Lee and Ian King last week.

Yesterday’s peek at the first-quarter results was preceded by strategic leaks about the improving numbers last week.

“Samsung executives had stoked anticipation for the first-quarter results with bullish public statements,” reportsFinancial Times’ Simon Mundy. “We’re done with recovery,” Kim Hyun-seok, head of Samsung’s television business, said last week. 

And in “an unusual pre-earnings comment,” Lee Joon, chief communications officer at Samsung Future Strategy Office, told reporters in Seoul on Wednesday: “It's fair to say that we will report improved profits during the January-March period,” CNET’s Musil writes. 

But it’s also fair to say that the news is not all positive.

“Revenue was lower than expected, in part a reflection of weaker household electronics revenue in Europe and some emerging markets, whose currencies have fallen significantly in recent months,” the FT’s Mundy writes. And as competition in the smartphone market intensifies, Samsung is not likely to see the profits it once did anytime soon, Nomura analyst CW Chung tells him.

In other news, “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,” reports Catherine Shu for TechCrunch. 

The bottom line is that the phones will bend under a lot of pressure but, as with the “Bendgate” controversy that cropped up around the iPhone 6, “you have to really try to bend them to get them to bend,” blogs the Washington Post’s Hayley Tsukayama.

Sounds similar to what they say about Apple fanboys but — when all is said and tallied — it remains a predominantly Android world out there.

2 comments about "Samsung Likes The Direction Its Numbers Are Taking".
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  1. Michael Kaplan from Blue Sky Creative, April 7, 2015 at 11:17 a.m.

    "Favorable received?" Guess you didn't read the NYTimes review...

  2. Thom Forbes from T.H. Forbes Co., April 7, 2015 at 11:33 a.m.

    Always a trick call, Michael. Farhad Manjoo's review was indeed negative but most of the reviews I've read were along the lines of Molly Wood's, also in the NYT: "... with the Galaxy S6 and Galaxy S6 Edge, Samsung is moving in a beautiful and powerful new direction, and has indeed created something that looks and feels new and different."

    And in rating it 8.9 on a scale of 10, CNET concludes: "Samsung's hardware has long stood up to the iPhone; at long last, its physical design does, too. Its high prices might deter some, but the Galaxy S6 accomplishes something important for Samsung: It’s a flagship phone that finally feels like a flagship."

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