Samsung Expects Q3 Revenue to Drop 20 Percent From Q3 2013

The drop is the result of increased market competition as well as higher-than-expected marketing expenses.

Samsung earnings and revenue

Samsung's Q3 2014 revenue total is expected to be about 20 percent less than in the same period one year ago, putting a big damper on the company as it issued an earnings guidance report on Oct. 7 in preparation for the announcement later this month of its Q3 financial results.

Revenue for Q3 is estimated to total about $44.2 billion, down from about $55.54 billion in Q3 2013, which is certainly disappointing for Samsung. Revenue for 2014 for the first three quarters is expected to total $143.85 billion, down about 9.67 percent to $159.25 billion for the first three quarters of 2013.

The big drops are the result of increased market competition as well as higher-than-expected marketing expenses tallied as the company has been trying to boost sales, according to the company.

"Samsung Electronics' 3Q earnings is expected to decrease substantially quarter-on-quarter as a result of declines in the mobile business due to intensified smartphone competition, which also had an adverse effect on the performance of the OLED and S.LSI businesses, and weak seasonal demand for the CE business, including TVs," the company said in a statement."Smartphone shipments increased marginally amid intense competition. However, the operating margin declined due to marketing expenses related to aggressive promotions and lowered ASP (Average Selling Price) driven by reduced proportional shipments of high-end models coupled with price decreases for older smartphone models."

Samsung's operating profit tumbled even more, falling to $3.85 billion in Q3 2014, compared with $9.55 billion one year ago, according to the company's guidance estimates. That's a 59.65 percent drop in one year.

Still, Samsung "cautiously expects increased shipments of new smartphones and strong seasonal demand for TV products" in the future, according to the guidance report. "To secure sustainable mid- to long-term growth despite intensified competition, Samsung is preparing new smartphone lineups featuring new materials and innovative designs, as well as a series of new mid- to low-end smartphones with strong competitive positioning on both hardware specifications and price."

Sales of Samsung's top-of-the-line smartphone, the Galaxy S5, have not been as high as expected, which is likely the result of the recent arrival of Apple's iPhone 6 and iPhone 6 Plus phones, which have set new smartphone initial sales records for Apple.

Samsung had released similar disappointing guidance back in July, when the company announced that its Q2 2014 earnings were also going to be below market expectations, according to a previous eWEEK report.

Samsung has in the past dominated the phone market by offering a variety of devices at multiple price points and by meeting consumers' interest in large displays, while Apple previously had limited the size of its iPhones. Things seem to be changing, as well as Samsung's fortunes, as the market continues to mature.