Samsung Woes – Robbery & Profit Drop
Samsung right now is one of the major players in the global smartphone market, controlling the largest share of active Android devices. But all is not going well for the South Korean technology giant as it has gone through some rough waters the past quarter.
Late Monday night (July 7th, 2014) over 20 armed robbers disguised as Samsung employees looted over 40,000 products worth approximately $6.5 million from a Samsung factory in Brazil. The criminals loaded the goods into seven trucks whilst holding around 50 workers hostage.
Fortunately, there were no instances of injury. Reports claim that majority of the workers continued work during the heist however they all had their cell phone batteries removed to prevent contacting local authorities. Samsung said in a statement afterwards, “We are very concerned about this incident. Fortunately, nobody was hurt. We are cooperating with the ongoing police investigation, and we will do our best to avoid it happening again.”. Initial reports had the net worth of goods stolen at nearly $36 million however later the sum was corrected.
To add to their woes, Samsung recently posted their earnings for Q2 (Quarter 2) and things do not look good. The company has observed a 24% fall in operating profits from last year and is continuing along a path of falling operating profit for the third consecutive quarter. Samsung’s share value has fallen to 1,292,000 won ($1276.24), the lowest since March 26, 2014.
Samsung has reported earning 7.2 trillion ($7.1 billion) the past quarter, whereas analysts estimated profits of 8.1 trillion won ($8.1 billion) according to Bloomberg, and 7.85 trillion won ($7.76 billion) according to The Wall Street Journal. Samsung cites strong competition from companies like Xiaomi in the Chinese and European markets which observed stellar growth over the past few quarters as reasons behind falling sales.
Chinese manufacturers like One Plus and Xiaomi are offering devices with top tier flagship specifications for almost half the price of Samsung devices which is fueling their growth. Samsung has been infamous for having a device in store at almost every price point for each user but now it seems that plan is backfiring as these new entries are commanding the emerging markets. The company mentions that due to the South Korean currency appreciating against the dollar and euro, exporting devices have become more difficult. Furthermore, it also cites a general decline in the growth of the smartphone market as a key factor.
Samsung however is cautiously predicting a boost in sales as Q3 arrives due to the impending release of a new lineup of smartphones, possibly hinting towards the Galaxy Note 4. The OEM also looks optimistic to make profits from its new Android Wear device – the Gear Live, as well as those that will follow it. Whatever cards Samsung has up its sleeves, it needs to make a good move this quarter to escape the spiral of declining operating profits and get back in the game as the brand to beat in both emerging and developed markets.