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Samsung feels the pressure as mobile profits plunge by 64 percent

As Apple reported record profits off the back of massive iPhone sales on Tuesday, executives at Samsung were probably shifting a little uncomfortably in their seats after having already seen their own data for the same quarter.

The Korean tech firm’s Q4 financial results, released on Thursday local time, showed a 23 percent fall in mobile revenue from the same quarter a year earlier. Mobile profits for the three-month period ending December 31 fell more dramatically, by 64 percent compared to a year ago, with Q4 pulling in 1.96 trillion won ($1.8 billion) in earnings.

Samsung has been having a hard time selling its budget phones in emerging markets, where competitively priced devices from fast-growing tech brands like Xiaomi are proving popular with consumers. It also risks stumbling with its first phone powered by its all-important Tizen OS, with reports suggesting its recent launch may not have got off to the best of starts.

Its high-end offerings are also being squeezed, increasingly so since Apple launched its large-screen iPhone 6 smartphones, which helped the Cupertino firm to its most successful quarter in its nearly 40-year history.

Of course, Samsung’s handset sales have far from dried up. The company didn’t reveal unit sales, but the Wall Street Journal reported analysts’ predictions of  between 74 million and 77 million smartphone sales in Q4, down from the 86 million Samsung shipped in Q4 2013. These are big numbers, but the downward trend will certainly be a continuing cause of concern for the bosses in Seoul.

New strategy

The bigger the ship, the longer it takes to turn around, though of course it’s not even certain that Samsung’s new mobile strategy, implemented as a result of a recent internal review, will even work.

Robert Yi, the company’s head of investor relations, said a couple of months ago Samsung planned to cut the number of handset types it produces by up to 30 percent in an effort to reduce costs and pump up earnings.

It also wants to focus more on its curved touchscreen technology in the hope of boosting the desirability of some of its high-end phones.

In a release Thursday, Samsung said that although seasonality is likely to squeeze demand for phones and tablets in Q1 relative to the previous quarter, the company plans to increase sales through new product line-ups such as its Galaxy A series.

For its entire business, Samsung pulled in 52.7 trillion won ($48.6 billion) in revenue last quarter, marking a fall of 11 percent on the same period a year ago. Net profit hit 5.3 trillion won ($4.9 billion), marking a 36 percent drop on a year ago and taking the company to its fifth consecutive quarterly decline.

Its profit for the whole of 2014 showed a fall, too, from a record 36.8 trillion won in 2013 to 25 trillion last year – its worst annual profit in four years.

The earnings were actually in line with market expectations, but that certainly won’t make the data any easier to swallow for executives at the electronics giant.

[Source: Samsung]