Sam­sung warns of gloomy 2016 for tech­nol­ogy

The Pak Banker - - COMPANIES/BOSS -

Sam­sung Elec­tron­ics Co. warned of slow­ing de­mand and eco­nomic tur­bu­lence af­ter its quar­terly earn­ings missed an­a­lysts' es­ti­mates, join­ing Ap­ple Inc. in fore­telling a down­beat 2016 for the tech­nol­ogy sec­tor.

The Korean con­glom­er­ate, whose quar­terly profit fell short of ex­pec­ta­tions by al­most 40 per­cent, said the de­te­ri­o­rat­ing global econ­omy was erod­ing de­mand for com­put­ers and smart­phones and de­press­ing com­po­nent prices. Sam­sung will in­vest in new screen and semi­con­duc­tor tech­nolo­gies such as fold­able dis­plays to try and boost profit, ex­ec­u­tives said on a con­fer­ence call.

Sam­sung's warn­ing came days af­ter Ap­ple -- its big­gest cus­tomer ac­cord­ing to data com­piled by Bloomberg -- pre­dicted its first sales de­cline in a decade. Chief Ex­ec­u­tive Of­fi­cer Tim Cook said the com­pany was see­ing "ex­treme con­di­tions" un­like any­thing the world's largest tech­nol­ogy com­pany had ever en­coun­tered, with eco­nomic growth in China at its weak­est pace in 25 years.

"All tech­nol­ogy com­pa­nies around the world will face a very tough in­dus­try ahead. Un­til the over­all de­mand picks up, it's a mat­ter of how well they can hold out in­stead of how well they can bat­tle out," said Yoo Eui Hyung, an an­a­lyst at Dongbu Se­cu­ri­ties Co. "For 2016, since no de­mand growth is ex­pected, it largely de­pends on how well the sup­ply of chips and dis­plays can be man­aged."

Shares of Sam­sung, the world's big­gest maker of phones, dis­plays and mem­ory chips, fin­ished 2.6 per­cent lower in Seoul. The stock has fallen more than 9 per­cent this year, com­pared with a 2.8 per­cent de­cline in the bench­mark Kospi in­dex. The cau­tion­ary tones adopted by Ap­ple and Sam­sung sent rip­ples through an in­dus­try whose for­tunes are en­twined with the mar­ket's two lead­ing play­ers. Mo­bile com­po­nent sup­pli­ers TDK Corp., Mu­rata Man­u­fac­tur­ing Co. and LG Dis­play Co. slid on Thurs­day af­ter Ap­ple shares tum­bled 6.6 per­cent.

Sam­sung re­ported net in­come ex­clud­ing mi­nor­ity in­ter­ests fell 39 per­cent to 3.24 tril­lion won ($2.7 bil­lion) in the De­cem­ber quar­ter, lag­ging the 5.4 tril­lion-won av­er­age of es­ti­mates com­piled by Bloomberg. That re­sult in­cludes a 2.5 tril­lion won non-op­erat- ing loss due to im­pair­ment charges, the im­pact of a stronger Korean won and ane­mic growth in its key smart­phone and chip units. On Thurs­day, it said will buy back 2.99 tril­lion won of stock in the se­cond phase of its buy­back pro­gram. Global smart­phone ship­ments rose just 6 per­cent in the fi­nal quar­ter of 2015 -- the slow­est pace of growth on record, ac­cord­ing to re­search firm Strat­egy An­a­lyt­ics. Sam­sung said it shipped 97 mil­lion handsets -- in­clud­ing low-end fea­ture phones -- and 9 mil­lion tablets in the hol­i­day quar­ter. Strat­egy An­a­lyt­ics es­ti­mates Sam­sung's smart­phone ship­ments grew a mere 0.8 per­cent in 2015 due to tougher com­pe­ti­tion from Ap­ple in the high-end seg­ment and China's Xiaomi Corp. and Huawei Tech­nolo­gies Co. in the bud­get cat­e­gory.

"The over­all smart­phone mar­ket will re­main dif­fi­cult through­out this year but we still see growth in the lower-end seg­ment, al­though com­pe­ti­tion will be tougher," Lee Kyeong Tae, vice pres­i­dent of the mo­bile com­mu­ni­ca­tions busi­ness, said on the call. "We will con­tinue to add more fol­low-up mod­els of the A and J se­ries this year to strengthen our com­pet­i­tive­ness in the lower-end space." To fire up con­sumers, Sam­sung will in­tro­duce two new ver­sions of its top-tier Galaxy S mod­els at the Mo­bile World Congress in Barcelona next month, ac­cord­ing to peo­ple with knowl­edge of the mat­ter. The S7 phone will have a 5.1-inch front screen and the S7 Edge will have a 5.5inch screen stretch­ing down the sides, one of the peo­ple said. Cost con­trols helped en­hance mar­gins even as mo­bile divi­sion sales fell.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.