Investors sent Samsung shares soaring more than 4.5% on Thursday as the company reported dismal third-quarter earnings… that were thankfully less dismal than analysts were expecting. In a world where the high end of the smartphone market is being squeezed by more capable mid-range and low-end phones, Samsung’s response has been to flood the market with cheaper low-margin phones. How did that work out? In the third quarter, Samsung’s operating profit plunged 60% on year to $3.9 billion and its revenue slid 20% to about $44.6 billion.
One tweet from mobile analyst Horace Dediu says it all:
Q3 (latest) Samsung’s Android device operating profit $18/unit. Estimated iOS device operating profit: $224/unit.
— Horace Dediu (@asymco) October 30, 2014
Samsung wasn’t shy in admitting that its smartphone business has weakened significantly as increased competition from Apple at the high end and from Chinese smartphone makers at the low end makes it increasingly difficult to thrive. The company did say that it still “cautiously” expects holiday-quarter earnings to improve as TV sales increase, however.