Samsung on Tuesday reported its second consecutive quarter of declining on-year profits as growth of the company’s high-end smartphone sales continued to slow. The company posted audited first-quarter results that were in line with the guidance it released earlier in April. Operating profit came in at $8.2 billion, a 3.3% decline from the year-ago quarter, on revenue totaling $52 billion. Net profit climbed 5.9% to 7.34 billion thanks to improved margins. Samsung said its results should improve in the second quarter of the year thanks to sales of its new Galaxy S5 flagship phone, which launched during the second week of April.
The Wall Street Journal put together a nice quick list of five key takeaways that cover the nuts and bolts of Samsung’s latest earnings report:
“No specifics yet on how sales of the Galaxy S5 are doing, but executives hope for a ‘slight’ quarterly increase in smartphone and tablet sales.” — Galaxy S5 sales didn’t officially begin until April 11th, so the company’s first-quarter earnings only cover very early shipments into channels. Samsung’s Q2 report will give us a much better idea of how the Galaxy S5 has been received.
“Samsung’s smartphone margins are roughly flat versus a year ago, but face increasing pressure from cheaper Chinese rivals.” — Competition at the bottom of the smartphone market is increasing and sales growth at the top of the smartphone market is slowing. It’s not exactly a mystery why Samsung is trying so hard to make smartwatches happen.
“Speaking of marketing, Samsung is re-emphasizing its ability to keep its famously hefty ad budget in check.” — If there’s one thing Samsung knows how to do, it’s spend a whole lot of money to help it sell a whole lot of devices. Marketing helped Samsung make good on its impossible promise, but the company tweaked its spending in Q1 to help stabilize its margins.
“Samsung’s cash pile grew, but the company hasn’t yet offered any sign of what it plans to do with it.” — Samsung now has $60 billion in cash and cash equivalents. Just as Apple drew tremendous heat as its cash pile grew, industry watchers are now starting to wonder what Samsung plans to do with all that cash.
“Semiconductors, the brightest spot for Samsung over the past year, keep on trucking.” — Consumers know Samsung as a gadget maker, but it also builds many of the components that help power its gadgets as well as other companies’ gadgets. Profit margin in Samsung’s chip business skyrocketed to 20.8% from 12.5% in the year-ago quarter, and the company spent about $3 billion in capital investments for its memory-chip business last quarter alone.