Disappointing Galaxy S6 Sales Lead To Another Down Quarter For Samsung

It appears Samsung did not get the payday it was looking for from the Galaxy S6.

In the same quarter that the Korean conglomerate launched its flagship smartphone, the company reported its fifth straight quarter of profit drops, largely due to "quite muted" smartphone sales and continued decline of its mobile business that not too long ago was the company's big moneymaker.

Samsung's mobile division saw a 7.3 percent revenue decline from the June quarter of last year, reporting 25.5 trillion Korean won ($21.29 billion) down from the 27.51 trillion won ($23.43 billion) in the year-ago quarter.

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The demise of its mobile unit is largely due to it falling short against Apple's iPhone 6 in its high-end mobile device sales, in addition to the emergence of heavy competition in Xiaomi, Huawei and Lenovo in the mid-to-entry-level Chinese mobile market.

Patrick Moorhead, president and principal Analyst of Moor Insights & Strategy, a leading tech analyst firm based in Austin,Texas, said Samsung did not offer enough innovation in its Galaxy S6 and S6 Edge devices to appropriately counter Apple's record iPhone 6 sales.

"To increase their success against Apple, Samsung needed to bring to the table a unique and valuable proposition versus the iPhone 6 and iPhone 6 Plus," Moorhead wrote in an email. "They brought out a unique phone, the S6 Edge, but its differentiation wasn't valued versus the iPhone 6 or 6 Plus at similar prices. Having display curves that look cool is unique, but not valuable. Plus, while they added features, Samsung also removed loved features like replaceable batteries and SD cards."

Samsung said that it will be "adjusting" the price of its S6 phones going forward in order to drive up shipments. Exact sales figures of the devices were not given.

The company reported revenue of 48.54 trillion won ($41.35 billion), a 7 percent drop from 52.35 trillion won ($44.63 billion) in the June quarter last year.

Samsung's profit fell 8 percent year on year to 5.75 trillion won ($4.93 billion) from 6.25 trillion won ($5.33 billion) in the year-ago quarter.

The company's stock has fallen 3.8 percent on the Korean Stock Exchange.

After seeing down smartphone sales in 2014, Samsung fired dozens of high-ranking executives in its mobile division, including vice presidents, senior vice presidents and executive vice presidents, according to a Wall Street Journal report.

Samsung's U.S. smartphone presence has fallen to 29 percent market share, behind Apple's 42 percent share, according to Finnish research firm, Verto Analytics.

Despite the disappointing mobile numbers, Samsung's semiconductor business continues to emerge. The company reported sales of 11.29 trillion won ($9.61 billion) in the segment, up 15.4 percent from 9.78 trillion won ($8.33 billion) in the year-ago quarter.

"Samsung is on a roll with memory and are wildly profitable there," Moorhead wrote in an email. "On the other hand, I do not believe Samsung's yields on 14nm have been great, which is a draw on profitability while helping on the revenue side. It appears Apple is up and running on Samsung 14nm processors, but to go big volume they will need to figure out how to improve yields."

Going forward, Samsung said it expects its semiconductor business to continue to grow throughout the second half of the year. The company intends to drive higher demand in its mobile business as well with "new large-screen model launches" and price changes.

PUBLISHED JULY 30, 2015