Samsung’s Q1 Profit Drops 39% Due To Heavier Smartphone Competition

Samsung Electronics has disclosed its first-quarter earnings, with operating profit tumbling once again thanks to pressure from rival smartphone makers. Its performance stands in sharp contrast to Apple, which posted its second-largest quarterly earnings of all time earlier this week.

The South Korean company reported net profit of 4.63 trillion won (about $4.35 billion), a 39 percent drop from the 7.49 trillion won it reported a year ago. This fell below analysts’ expectations, as well as Samsung’s own forecast for operating profit of 5.9 trillion won. Revenue slipped 12 percent year-over-year to 47 trillion won.

Samsung Electronics’ smartphone sales have been hurt by competition with Apple and a slew of smaller Android device makers, but Samsung sounded an optimistic note, predicting a recovery in the second-quarter thanks to its new Galaxy S6 and Galaxy S6 Edge.

Samsung Electronics’ mobile unit saw its first-quarter operating profit plunge 57 percent year-over-year to 2.74 trillion won. Its operating profit margins climbed 10.6 percent quarter-over-quarter, however, which the company attributed to stronger sales of its mid-range smartphones. The company said it plans to continue boosting margins by spending less on marketing.

In addition, the company also believes its second-quarter earnings will be buoyed by its semiconductor business, as it sells memory chips to other smartphone manufacturers that are about to launch new flagship smartphones. Like mobile, its semiconductor unit has also seen an improvement in margins, which climbed to 28.5 percent this quarter compared to 20.8 percent a year ago.

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