Samsung Posts First Annual Profit Decline in Three Years

By: Gizbot Bureau

Samsung Electronics, the world's largest smartphone maker, posted its first drop in annual net profit in three years today, days after arch-rival Apple reported the biggest corporate profit in history.

The South Korean firm, whose key mobile phone operations have struggled in the face of intense competition from cut-price Chinese rivals, also warned that it expected 2015's "business environment... to be as challenging as 2014."

Samsung Posts First Annual Profit Decline in Three Years

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The tech giant said today it recorded a net profit of 23.4 trillion won (USD 21.45 billion) in 2014, down 23.2 per cent from a year ago and the first decline since 2011. Operating profit fell 11.7 percent to 25 trillion won in the year and sales also tumbled 10 percent to 206 trillion won.

The fall was cushioned in the fourth quarter by a boom in high-margin chip sales that helped offset the downturn in the key mobile sector, with operating profit in the semi-conductor division rising 35.7 percent to 2.7 trillion won in the October-December period from a year earlier.

Under growing pressure to boost shareholder returns, however, the company still managed to announce an increased dividend of 19,500 won a share, up from 13,800 won a year earlier. Samsung shares fell 0.36 percent, or 5,000 won, to 1,374,000 won in morning trading in Seoul.

The annual profit figure marked a dramatic reversal for the company, which is also facing a once-in-a-generation leadership change, after several years of stellar growth, driven by the once all-conquering mobile division. And it contrasted sharply with the triumphant surge in the fortunes of California tech titan Apple, whose fourth quarter net profit stood at USD 18 billion -- the largest ever made by a public company.

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Apple's performance was driven by the sale of 74.5 million iPhones, which included a doubling of sales volume in the crucial Greater China region. Samsung's fourth quarter net profit, meanwhile, was down 27 percent at 5.3 trillion won.

The company's flagship Galaxy phones have suffered in the high-end market thanks to the popularity of the iPhone 6, while its dominance of the middle- and low-end handset segment has been challenged by Chinese firms such as Huawei, Xiaomi and Lenovo.

Samsung plans to slash the number of smartphone models it issues in 2015, while boosting production of remaining models that can be sold more cheaply to compete with Chinese rivals.

Source: PTI

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