Samsung Earnings Estimates Reveal Smartphone Struggles

Samsung on Tuesday posted a disappointing pre-earnings guidance, indicating the South Korean company's struggle to stay a leader in a hyper-competitive premium smartphone market even after the recent release of its popular Galaxy S6.

"The biggest problem for Samsung is that they haven't figured out the right marketing recipe to deal with the competition Apple has put on the premium segment," said Jack Narcotta, devices analyst at market research firm Technology Business Research. "At the same time, they have companies nipping at their heels, like Xiaomi and Huawei, taking a lot of Samsung's market share."

Samsung's 5.1-inch Galaxy S6 and curved Galaxy S6 Edge smartphones, released in April, were widely praised for their high-end metal and glass construction as opposed to the typical Galaxy S series chromed plastic construction.

[Related: 5 Hurdles Samsung Faces In The Mobile Market]

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However, despite the popularity of the Galaxy S6 smartphone, the company's estimates for its earnings for the second quarter, ended June 30, suggest that the device sales may not have been as high as expected.

While Samsung didn’t specify how many smartphone units were sold, the company stated in a release that it expected a sales drop of 8 percent from the same quarter last year.

Samsung also expects to earn $6.1 billion in operating profit for the second quarter, a 4 percent decline from the same quarter a year ago.

Narcotta, for his part, explained that Samsung's weak earnings may stem from miscalculations over demand for devices.

"Samsung may have overestimated the demand for the S6 or undersold it. … The more probable reason is that they undersold and under-marketed the product," he said. "Right now, Samsung's best bet is to cut down on their portfolio bloat and move the spotlight from premium [smartphones] to midrange."

The overall smartphone market is undergoing a fast-paced transition as the popularity of vendors shifts and undeveloped markets slowly develop.

Companies like Apple are slowly cannibalizing Samsung on the high end because of the popularity of recent smartphones like the iPhone 6 and the iPhone 6 Plus.

In the low-end and midrange smartphone markets, Samsung also has been struggling against a barrage of companies like Xiaomi, ZTE and Huawei that took valuable share from customers in emerging markets.

Ira Grossman, chief technology officer of end-user and mobile computing for MCPc, a Cleveland-based Samsung partner, said the "allure" of Apple is just too high for companies like Samsung to compete with.

"No one can match the allure of Apple's products. … As it releases new products, it has not changed its price point," he said. "Until Samsung is able to create something that has the same fire and that commands that competitive premium price point, they'll continue to be pressured."

Samsung's quarterly earnings call will occur at the end of July.

PUBLISHED JULY 7, 2015