Samsung took a record beating as Apple prepared for record iPhone 6 sales

While its main rival can’t make enough new iPhones to go around, Samsung is getting ready to announce its fourth consecutive quarter of earnings decline, Reuters reports, and its first annual profit dip since 2011. Even worse, Samsung’s profit for the July-September quarter will be its lowest since the second quarter of 2011, Reuters reports.

Operating profit for the third quarter is expected to have dropped by 59.7% to 4.1 trillion won (or $3.8 billion) during the period.

Apparently, Samsung’s mobile business continued to suffer when it comes to smartphone sales during third quarter, even though the iPhone 6 wasn’t available in stores until the last two weeks of the period – and the phone only launched in more than 30 markets before the end of September.

Operating margin for the smartphone business dropped “substantially,” because of Samsung’s increased marketing costs and “sharply lower average selling prices.” ASPs likely fell to $224 in the third quarter, HMC Investment analyst Greg Roh revealed, from $301 in the previous quarter.

Short-term prospects for smartphones are apparently “uncertain,” as Samsung is being squeezed at both ends of the market. The company is facing increased competition from many other companies that sell cheaper handsets, especially in China, while also losing the battle to high-end devices such as the iPhone in the premium smartphone segment.

Samsung plans to launch new “cost-competitive” handsets by the end of October, featuring similar components as the Galaxy S5 flagship, but priced between $300 and $400, and “cautiously expects,” higher shipments of handsets in the following period.

Even though Samsung is uncertain about its mobile prospects, its stock jumped 1.1% on Monday, with analysts expecting the company to turn profits around with help of upcoming smartphone models.

“Considering the operating profit guidance, it looks like the company dealt with unsold inventory issues during the third quarter,” Alpha Asset Management fund manager Hong Jeong-woong said. “I think Samsung’s earnings are at a turning point.”

Apple has supposedly sold more than 21 million iPhone 6 units in the first two weeks (at least according to unofficial estimates), of which 10 million units were sold during the launch weekend. Apple will release its earnings report for the July-September quarter in the following weeks.

Samsung has reportedly been surprised by the strong iPhone 6 launch, and tried to move up the Galaxy Note 4 release date, although it only managed to offer the handset by the end of September in just a few markets including South Korea and China.

SOURCE:

REUTERS