Samsung Estimates 60 Percent Drop In Q3 Profit

Samsung estimated it will report a 60 percent drop in profit when it makes its third-quarter earnings report toward the end of this month, for its fourth straight quarterly drop.

The Korean tech conglomerate attributed the decrease to weaker demand for its mobile products in addition to an uptick in marketing expenses.

"Samsung Electronics' 3Q earnings is expected to decrease substantially quarter-on-quarter as a result of declines in the mobile business due to intensified smartphone competition, which also had an adverse effect on the performance of the OLED and S.LSI businesses, and weak seasonal demand for the CE business, including TVs," Samsung said in a statement. "Smartphone shipments increased marginally amid intense competition. However, the operating margin declined due to marketing expenses related to aggressive promotions and lowered ASP (Average Selling Price) driven by reduced proportional shipments of high-end models coupled with price decreases for older smartphone models."

Related: Samsung To Exit European Laptop Market As Second-Tier PC Makers Struggle

Samsung said it estimates an operating profit of 4.1 trillion won (about $3.8 billion) for the third quarter of 2014, a 59.65 percent year-over-year drop. The tech giant said it expects it sales figures to be 47 trillion won, a decline of 20.45 percent from the year-ago quarter.

"I'm surprised. We see a lot of demand still for Samsung devices," said Steven Kantorowitz, president of CelPro Associates, a Samsung partner based in New York. "Apple is still trying to take away their lunch by creating bigger devices, but internationally and domestically I still see a real high demand for Samsung devices."

Samsung, still the largest smartphone vendor in the world in terms of market share, was the only one of the top five vendors to see its sales numbers fall in the second quarter year over year, according to research firm IDC.

IDC said Samsung shipped 74.3 million units in the second quarter of 2014, down from 77.3 million in the prior year's quarter. Despite the overall smartphone market climbing 23.1 percent, Samsung's market share dropped from 32.3 percent in second-quarter 2013 to 25.2 percent in second-quarter 2014.

Despite the growth of Chinese vendors in emerging markets, Kantorowitz said it's Apple that Samsung needs to worry about.

"Apple is a big monster out there. People are lining up in front of stores days in advance to get their new phones," he said. "There are not too people lining up like that for BlackBerry or Lenovo or even Samsung. They just have that allure that no other brand has right now."

Kantorowitz believes that despite the disappointing earnings forecast, Samsung isn't going anywhere, saying the company will rely on price points to undercut its competition and that he looks forward to the new Galaxy Note 4 and Note Edge coming out later this month.

Samsung itself said it intends to compete on price and specification in high-end, midlevel and entry-level models in the fourth quarter.

PUBLISHED OCT. 7, 2014