Samsung posts record profit, but mobile slips despite Galaxy S4 launch

The South Korean electronics firm said its April to June net profit was up 50 percent from a year ago

By Jay Alabaster, IDG News Service |  

Samsung Electronics said sales and profits soared in the second quarter from a year ago, but increasing competition in smartphones hurt performance in its core mobile division.

The company said it booked a net profit of 7.77 trillion won (US$6.89 billion) during the April-June period, up 50 percent from a year earlier. Sales were up 21 percent to 57.5 trillion won.

The strong showings were marked by strong quarterly gains in every division except its core mobile business. Samsung launched its flagship Galaxy S4 in April with a massive global marketing campaign, after introducing it at an event in New York City's Radio City Music Hall. The company said increased marketing costs and competition hurt its profitability during the period, pulling operating profit down 3 percent even as its sales increased.

Executives hinted in an earnings conference call that new high-end phones are on the way, noting that the product cycle of smartphones is now about a year and its component business expected a boost from new advanced handsets in the second half of the year. Jeeho Baek, an executive in Samsung's semiconductor business, said he expected more demand due to the company's "planned launch of a flagship smartphone model."

The company said that the recent explosive growth of smartphones is due to cool off in the near future.

"Although we expect the smartphone market to sustain growth in the third quarter, it is possible the pace of growth may slow down slightly," said Hyunjoon Kim, an executive in Samsung's mobile division.

Samsung is a dominant manufacturer of display panels, NAND flash memory and other components, but the vast majority of its sales and profit now comes from its mobile division. The company said the Galaxy S4 sold more than 10 million units less than a month after launch, but has been quiet about the phone's performance since. In some markets, such as Japan, the phone has been sharply outsold by rivals.

Samsung's earnings reported Friday were in line with the forecast it made earlier this month. Investors have been disappointed with the company despite the strong showing, and the company's shares are down nearly 15 percent over the last two months. A survey of analysts by Bloomberg taken before the earnings report predicted second-quarter net profit to be about 6 percent higher than reported.

Earlier this week, main rival Apple said profits were down 22 percent during the quarter, but analysts expected the decline as the company did not have a major product launch during the period. Apple CEO Tim Cook said new products will be released later this year.

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