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Samsung reports disappointing quarter, profit down 6 percent YoY

Samsung Electronics earned not up to even essentially the most conservative analyst forecast in October-December after handing out an estimated $1 billion in bonuses to mark 20 years considering the fact that its chairman set it on the street to changing into a world behemoth.

The sector’s greatest smartphone maker has splashed out on its workers from a money pile of round $50 billion simply two months after rising its dividend yield some distance lower than many traders had anticipated.

Fourth-quarter running revenue was once seemingly eight.three trillion received, down 6 % on year and 18 % from a file 1/3 quarter, Samsung Electronics Co Ltd mentioned on Tuesday prior to a ultimate studying on January 24.

The determine used to be pulled down through bonuses given to workers excessive and low commemorating Chairman Lee Kun-hee’s “New Administration” technique which analysts put at 300 billion to seven hundred billion gained.

The revenue can be lower than probably the most bearish forecast amongst 23 analysts polled by means of Reuters of eight.eight trillion gained, and may be the lowest for the reason that eight.1 trillion gained of July-September 2012.

Samsung shares traded unchanged at 1.307 million gained after the announcement, versus a zero.three % acquire within the wider market.

“Samsung’s different incentive funds to workers together with home and in another country devices seem to were a lot better than the market anticipated; advertising and marketing prices of its mobile trade may have additionally been greater,” mentioned Shinhan Funding analyst Kim Younger-chan.

Lee, who took over Samsung Group in 1987 from his founder-father, in 1993 ordered lieutenants to “change everything except your wife and children” to transform Samsung Electronics from a mid-tier television set manufacturer into a global technology leader.

It has since overtaken Sony Corp in TVs, Nokia Oyj in mobile phones and Apple Inc insmartphones.

Lee, who turns 72 this week, set the agenda for the future in his New Year speech by stressing the need to drop a hardware-centric culture and adopt new ways of thinking to drive innovation.

The company usually pays bonuses up to 100 percent of basic monthly salary to employees in units which achieve targets, and up to 50 percent of annual salary by returning 20 percent of profits that exceed targets. Korean companies often pay low salaries and top up with various bonuses.

Smartphone sales
Fourth-quarter earnings were also likely affected by Samsung’s flagship Galaxy S and Note smartphones losing out somewhat to Apple in the United States and Japan during the year-end holiday season.

It estimated fourth-quarter sales of 59 trillion won, versus the 61 trillion won Thomson Reuters’ Starmine SmartEstimate of 23 analysts, which gives greater weighting to the more accurate analysts.

Samsung is bracing itself for its toughest year at its mobile devices division since it started making smartphones in 2007, with analyst estimates ranging from low single digit profit growth to mild contraction after growing eight times over in past five years.

The division, which earns two thirds of overall operating profit, will come under pressure when Apple makes its phones available from January 17 via China Mobile Ltd, through which Samsung has been selling smartphones for around seven years.

Apple is also widely expected to sell smartphones with larger screens come autumn when it traditionally announces products, neutralising a selling point that Samsung has enjoyed since introducing its Galaxy Note in late 2011.

“Even taking into account one-off costs, the (fourth-quarter) profit is lower than expected. Samsung has not provided details, butsmartphone profit may have fared worse than expected, given increased marketing expenses,” said IBK Investment & Securities analyst Lee Seung-woo.

Weak smartphones gross sales would translate into weaker income at Samsung’s elements companies, in particular its show unit which counts Samsung’s mobile and TV fingers as its greatest clients.

Samsung shares were pummelled in latest weeks by way of 22 analysts downgrading fourth-quarter cash estimates over the last 30 days.

The shares, value $a hundred ninety billion, fell 10 % over the last fortnight to a four-month low final week, wiping off market worth to the tune of $19 billion – equal to the whole price of shares of Sony.

The gained’s upward push to a 5-year excessive in opposition to the U.S. buck has additionally been prompting traders to promote, as a powerful gained reduces the worth of Samsung’s repatriated cash.

© Thomson Reuters 2014