Samsung’s Registers A Dip In Profit

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The New Year has begun on a bad note for Samsung. The company has experienced its first drop in profit in two years (a mere $7.8 billion, compared to $8.27 billion in the same quarter last year), due to one-off bonus payment to employees and heavy holiday marketing costs.

The company expects slowing sales in the first quarter of 2014 for its smartphones and tablets, thanks to seasonality. Samsung also indicated that the mobile battlefield is only going to get fiercer over the next year, as developed markets are reaching saturation. Now, the war is shifting to developing markets where more people are becoming smartphone and tablet owners for the first time.

In its earnings report, Samsung stated: “In 2014, the company will focus on expanding its smartphone portfolio both by region and price range, and actively responding to growing LTE demand in Europe and China.
This isn’t to say that Samsung doesn’t already have a large presence in areas like China and India — it’s currently the market share champion in both countries — but its dominance is quickly slipping as it faces intense competition from both local and global companies alike. Not only is there more competition in these countries in general, there’s also a much more pointed focus on specific form factors and price points.

As the battle continues to intensify in countries like China, where demand is growing at a tremendous pace, Samsung’s profit margins will get squeezed as phone prices plunge. Thus, we expect to see the company hit tablets and wearables even harder in 2014.

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