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Samsung's 4Q profit hit by slowing mobile growth

Tuesday - 1/7/2014, 12:38pm  ET

A woman uses her mobile phone near advertisements for Samsung Electronics' Galaxy Note 3 at a showroom of Samsung Electronics in Seoul, South Korea, Tuesday, Jan. 7, 2014. Samsung Electronics Co.'s fourth-quarter operating profit declined 6 percent over a year earlier, the company said Tuesday, underlining the challenges the world's largest smartphone maker faces as sales of mobile devices slow in advanced countries. (AP Photo/Lee Jin-man)

YOUKYUNG LEE
AP Technology Writer

SEOUL, South Korea (AP) -- Quarterly earnings at Samsung Electronics Co. fell for the first time in two years as sales of smartphones and tablets slowed in developed countries.

The South Korean company Tuesday estimated an operating profit of 8.3 trillion won ($7.8 billion) for the final three months of 2013, a 6 percent decline over a year earlier. The result was lower than forecast by analysts and an 18 percent drop from the third quarter. Sales rose 5 percent to 59 trillion won ($55.4 billion).

Since the last quarter of 2011, Samsung's operating income has increased every quarter, peaking at 10.2 trillion won in the July-September period. The fourth quarter performance shows that explosive growth in Samsung's lucrative mobile device business has come to a halt.

It will release its net profit result for the fourth quarter later this month.

Analysts said Samsung's profit fell because its businesses supplying advanced displays and chips for iPhones and Galaxy smartphones posted smaller profit. They said Samsung's smartphone business making Galaxy smartphones and Galaxy Gear smart watches was not as lucrative as before because of higher marketing costs.

"It's an earnings shock," said analyst James Song at KDB Daewoo Securities Co. "The profit at mobile communications business must have been much lower than expected although it's likely that Samsung gave bigger bonuses to employees." Song had estimated 9.3 trillion won of operating profit for Samsung.

Samsung Electronics' smartphone business also faces more competition in China. Starting next week, Apple Inc. is scheduled to begin selling iPhones through China Mobile Ltd., the world's largest wireless carrier, a move that could threaten Samsung's growth in the smartphone market.

Samsung held 21 percent market share in China's smartphone market during the third quarter, up from 14 percent a year earlier, while Apple's share declined to 6 percent from 8 percent, according to research firm Canalys.


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