Samsung forecasts profit drop for second straight quarter

Samsung Electronics on Tuesday posted estimated first quarter operating profits of 8.4 trillion won ($7.96 billion), marking a second straight year-on-year decline as global smartphone sales slow. The estimate was in line with market expectations of operating profits between 8.14 trillion won and 8.63 trillion won for the January-March period at the world's largest mobile phone maker. "The operating profits fell for two straight quarters year-on-year as profit margins in smartphones were falling and the growth rate in smartphone sales was decreasing due to growing competition," analyst Young Park of Hyundai Securities told AFP. While the figure marks a 1.08 percent increase on the previous quarter, it is 4.3 percent lower than a year earlier, when the South Korean giant -- the world's largest technology firm by sales -- recorded operating profits of 8.78 trillion won. It marks the second quarter of year-on-year decline after Samsung posted Q4 operating profits that were 6.0 percent lower than those a year earlier. The company said its first quarter sales were estimated at 53 trillion won, up 0.24 percent from a year earlier. Shares in Samsung fell 0.21 percent to close at 1.39 million won in a flat market. Fixed first-quarter earnings are set to be announced later this month. - Slowing smartphone sales - The figures come as growth in smartphone sales slow, with mature markets like North America and Europe near saturation. This, coupled with the rapid expansion of smaller rivals like China's Huawei, has pressured Samsung to roll out cheaper handsets to woo consumers in emerging markets, especially China. Research firm IDC estimated average selling price of smartphones will fall to $265 globally by 2017 from $337 in 2013 and $387 in 2012. Nonetheless, estimated profits for Samsung's mobile division grew to 6.2 trillion won in Q1 of this year, up from 5.5 trillion won in the three previous months, Park said. This follows the earlier-than-expected release of its latest Galaxy S5 smartphone -- which Samsung hopes will cement its lead in the global smartphone market -- in South Korea, analysts said. For the whole of 2014, Samsung's operating profit is likely to be around 37 trillion won, about the same as last year's, Park said. The company made more than 30 percent of all smartphones sold in the world last year, nearly twice the share of its arch-rival Apple. But Samsung is also faced with a daunting challenge to keep momentum in the increasingly saturated market. Major handset makers have recently stepped up efforts to develop wearable devices, seen as a new source for growth -- though few have managed to garner large consumer excitement or sales. Samsung's first Internet-enabled smartwatch, introduced last September, was greeted coldly by consumers who viewed it unfashionable. Its second edition, the Gear 2, was launched in February. Apple is believed to be planning its own smartwatch launch soon, while Google is moving towards a wider consumer launch of its Internet-enabled eyewear Glass. Samsung is also under pressure to set aside more cash for legal bills as years-long patent battles against Apple continue. The two have locked horns in patent suits in several nations involving design and technologies on their smartphones and tablet computers. A fresh patent trial opened in the United States last week, with Apple vowing to prove that Samsung flagrantly copied iPhone features and should pay more than $2 billion in damages.