Samsung Enters 2019 By Disappointing Investors, Confirms Profit Drop
Samsung Electronics on Tuesday posted its earnings guidance for the final quarter of 2018, estimating it concluded the three-month period ending December 31 some $9.68 billion in the black. While the figure is massive on its own, it also marks a 28-percent drop compared to the fourth quarter of 2017. Virtually every established analyst expected Samsung to post a year-on-year decline in operating profits, though most anticipated a drop below the 20-percent mark. Samsung has yet to confirm its guidance as its latest bookkeeping process has yet to be concluded, meaning a detailed breakdown of its earnings remains unavailable. The technology juggernaut is scheduled to publish its consolidated financial report for the final three months of 2018 on January 31, though its official results are unlikely to significantly differ from the newly published estimated, as suggested by the company’s existing track record with financial disclosures. The Seoul-based chaebol estimates its Q4 2018 sales reached the equivalent of $53.37 billion, a notable decline compared to nearly $58.7 billion it generated in Q4 2017.
Trouble from all directions
While vague on specifics, today’s financial guidance did reveal what many suspected to be the case for several months now – Samsung’s growth not only stalled but started reversing across a variety of segments. Its memory chip division that was responsible for the most significant part of its growth recorded over the last two year is now facing a sharp decline in global demand, partially due to the fact the tech upgrade wave it’s been riding is over, and partially because its rivals caught up with some of its products. Without its largest growth driver, the firm was forced to rely on other aspects of its operations in order to account for that drop-off but was ultimately unable to do so. Even its flagship mobile unit disappointed investors throughout 2018, with both the Galaxy S9 and Galaxy Note 9 ranges selling below expectations, which has been a major problem for the better part of the last year and one of the main reasons why Samsung already started experiencing revenue drops over the same period. However, up until last fall, the tech giant’s well-oiled memory chip unit mostly managed to cover for the slow-down in its consumer electronics business.
Innovate or the highway
Those issues are precisely the reason why Samsung is now doubling down on innovation, not only in the ultra-premium segment of the market but also in the mid-range price bracket. The company is presently on a global mission aimed at blurring the lines between its flagship and mid-tier offerings, both in terms of hardware power and features. That isn’t to say its very top offerings won’t be making significant computational inroads over the course of this year but their more affordable alternatives are expected to debut even larger year-on-year improvements. Some of the features that the old Samsung would never think of commercializing in the mid-range segment until they ran their course as Galaxy flagship exclusives include in-display fingerprint readers, camera setups with three and more lenses, and 5G connectivity, yet that’s precisely what the company started doing in recent months. The Galaxy A8s mid-ranger even debuted an entirely new design language that high-end devices such as the Galaxy S10 and Galaxy Note 10 ranges are only now set to follow, with its aesthetic being centered on a display hole that serves as a less aggressive alternative to traditional notches.
Faced with aggressively priced and feature-rich competitors from China, Samsung has little choice but to improve the overall experience offered by its non-flagship Android devices if it hopes to regain the mobile momentum lost throughout 2018. For much the same reasons, the company is expected to soon do away with the entry-level Galaxy J series and drop the concept of low-end handsets altogether, at least from a marketing perspective. At the same time, it’s aggressively pushing for new innovations in the ultra-premium segment of the market, both in terms of functionalities and even form factors. Regarding the latter, Samsung is presently on the verge of unveiling its first-ever foldable Android handset, tentatively called the Galaxy Fold. That particular gadget and the entirety of the Galaxy S10 family may be announced as early as next month given how Mobile World Congress is already starting in Barcelona, Spain, on February 25.