Samsung misses Q2 forecasts; low-end phone competition a culprit

|About: Samsung Electronics Co., Ltd. (SSNLF)|By:, SA News Editor

Samsung (SSNLF, SSNGY) expects to report Q2 revenue of KRW51T-53T ($50.4B-$52.4B), and an op. profit of KRW7T-7.4T ($6.9B-$7.3B). Those guidance ranges are below Bloomberg consensus estimates of KRW53.2T and KRW8.1T.

The electronics giant blames "mid-to-low end" phone competition in China and Europe, a strong won, and higher marketing spend aimed at lowering phone inventories.

Also, tablet shipments fell more than expected due to a weak market, and mobile weakness had a spillover effect on internal display and chip sales.

Samsung is facing intensifying low-end/mid-range smartphone competition from Chinese OEMs pricing aggressively - its smartphone share fell Y/Y in both Q1 and Q4 (per IDC) following a long run of share gains, while Huawei and Lenovo each grew rapidly. Xiaomi, which shipped 26.1M phones in 1H14 (+271% Y/Y), is also a growing threat.

The tablet weakness comes after the market's growth slowed to a trickle in Q1. Notably, Samsung states phablets are cannibalizing 7"-8" tablets, and a lack of carrier subsidies is leading to low upgrade rates (previous).

Samsung is "cautiously" optimistic about Q3. It expects hardware refreshes to boost smartphone sales, and for display and memory chip sales to also rise.

Shares are up 0.5% in Seoul. Investors have been expecting soft Q2 numbers.