Samsung Q4 Sales, Profit Improve, but Problems Persist

Samsung's 2014 Q4 earnings were better than its Q3 figures, but full year profit and sales are down significantly from 2013 as the company continues to battle out of a slump.

Samsung, smartphones

Samsung showed a bit of improvement in its financial bottom line for the fourth quarter of 2014 compared with the prior quarter, but its full year 2014 financial numbers show that it still has a ways to go to stop the slide of its market share and earnings.

For the fourth quarter of 2014 ended Dec. 31, Samsung posted revenue of $48 billion, which is an increase of 11 percent from Q3, when the company posted $43.2 billion in sales. Net profit for Q4 was $4.8 billion, up 26.3 percent from the $3.8 billion that was posted in Q3, according to figures the company released on Jan. 29.

That $48 billion in Q4 revenue, however, was down 12 percent from the $54 billion the company posted in the same quarter one year ago. Full year 2014 revenue was also down, to $188 billion, a 10.6 percent drop from the $208 billion posted one year ago.

The company posted a net profit of $4.8 billion for Q4, which was down 37.5 percent from the $6.6 billion in net profit posted one year ago. Full year 2014 net profit was $21.28 billion, down 30 percent from the $27.7 billion posted for the full year of 2013, according to the company's figures.

Samsung has been hard hit the last several quarters by lower sales of its mobile phones, which have been giving way to cheaper phones from Chinese handset makers, and from stiffer competition from Apple and its latest iPhone 6 smartphones and from other competitors.

The company's IT and mobile communications division posted Q4 revenue of $22.8 billion, which was down 30 percent from the $29.6 billion that was posted for the same quarter one year ago. Profit for the mobile division was $1.78 billion in Q4, which was down 79 percent from the $4.9 billion profit that was posted in the fourth quarter of 2013.

Samsung continues to see weaknesses in other parts of its business, it said in its earnings announcement. "Slowdown in tablet sales and the shrinking PC and monitor markets could result in weak demand for PC panels, and the company will enhance its competitiveness and profitability in this segment by introducing premium products. Under such market conditions, the company will strive to increase sales and improve profitability by expanding mass market line-ups and increasing shipment of premium products."

The company had already announced late last year that it is in the midst of paring back the number of smartphone models it builds and sells to trim inventories, parts supplies and expenses as it works to find more sales in China, India and other emerging markets.

"Through new materials, innovative design and differentiated features, competitive products will be introduced to drive smartphone sales, while efficiency will be enhanced across R&D and marketing to increase profitability," the company stated. "In the first quarter of 2015, while seasonality is expected to decrease demand for smartphones and tablets relative to the previous quarter, the mobile business will focus on increasing sales and improving business performance through new product line-ups, such as the Galaxy A series."

Samsung's difficulties are in stark contrast to key rival Apple, which announced record-breaking first-quarter 2015 earnings on Jan. 27 with $74.6 billion in revenue and $18 billion in net profits, fueled largely by sales of Apple's latest iPhone 6 and iPhone 6 Plus smartphones, which were released last September. The $74.6 billion in revenue is a 30 percent increase over the $57.6 billion in revenue that was posted by Apple for the same quarter one year ago, while the $18 billion in net profit is up 37 percent from the $13.1 billion net profit that was posted in the same quarter one year ago.

Apple's revenue for iPhones in the quarter totaled $51.2 billion, which was up from $32.5 billion for the same quarter one year ago, on sales of 74.5 million iPhones around the world. That was an increase of 46 percent compared with the 51 million iPhones Apple sold one year ago in the same quarter.

Richard Windsor, an analyst with Edison Investment Research, told eWEEK in an emailed statement that Samsung's latest financial results are "reasonable" and that "some signs have emerged that management has regained a degree of control over the handset business."

The company's efforts are beginning to bear some positive signs, wrote Windsor, and some market share "should bounce back to some degree in Q1 15 as inventories normalize and the pent-up demand for the iPhone 6 eases."

Windsor added: "During the quarter, Samsung has taken various actions to stabilize the business which appear to have worked and is a big improvement on Q3 where everything that Samsung did had no effect. However, expectations are still too high in the long run as Samsung executives think that they can return this business to mid-teens margins over the medium term."

Samsung dominated the phone market in recent years by offering a variety of devices at a wide range of prices, and by meeting consumers' interest in large displays, while Apple previously had limited the size of its iPhones. That changed with the release of the iPhone 6 models.