Samsung forecasts first annual profit fall in 3 years

Samsung Galaxy Note 4

Samsung’s results for Q3 2014 were a big disappointment for the company, with year-on-year operating profit down by a sizable 60 percent, and sales income down by 20 percent.

And judging by its forecast for Q4, the tech giant has some real work to do to get its house back in order.

Samsung said on Thursday it expects to see an operating profit of 5.2 trillion Korean won (about $4.74bn) for the final three months of 2014, which, if it turns out to be correct, would mark a considerable 37.4 percent drop on the same period a year earlier, as well as being its first annual profit fall in three years.

The company also said it expected sales revenue for the period to come in at 52 trillion won ($47.4bn), up from 47 trillion won ($42.7bn) in the preceding quarter, though this represents a 7 trillion won drop on the same period a year earlier.

The Korean company has been struggling to compete with cheaper tech goods from emerging rivals, particularly in China. This includes its once burgeoning smartphone business, which is suffering in developing markets in the face of strong competition from the likes of Xiami and Huawei. In established markets, sales of its flagship Galaxy S5 handset have reportedly been disappointing, adding to Samsung’s problems.

The situation has led the company to rethink its strategy, with Robert Yi, Samsung’s head of investor relations, announcing recently that in an effort to cut costs and boost profits, the company plans to reduce the number of handset types it offers by as much as 30 percent.

Samsung senior vice president Kim Hyun-joon echoed Yi’s comments, promising that the tech firm will “fundamentally reform” its product portfolio.

Whether this means Samsung will launch fewer new models or ditch low-selling handsets isn’t entirely clear, though offering a smaller range of phones would allow the company to operate its inventory and various supply chains in a more cost effective manner.

Samsung will publish its Q4 results later this month.

[Source: Reuters]