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- Samsung has decided to take on increasingly low-cost products by expanding its operations by $3 billion in Vietnam.
- Samsung enjoys a favorable regulatory environment in Vietnam with the government exempting them from corporate taxes for 4+ years.
- Although Samsung's results have been slightly disappointing, investors might consider the recent dip a buying opportunity.
- Samsung's consistent and increasing dividends could also be attractive for income-oriented investors.
Samsung Could Refocus Growth Strategy As Q3 Earnings Plummet
- Samsung's smartphone business faces its biggest test yet, challenged by the arrival of Apple's large-screen iPhones and increasing competition from budget offerings.
- Semiconductor operations did well, aided by strong DRAM and NAND memory shipments.
- The consumer electronics division was weighed down by seasonally lower sales for appliances and lower pricing for televisions.
Mobile Business Slump Forcing Samsung To Refocus Its Strategy
- Samsung’s pre-earning guidance for Q3 2014 indicated that sales and operating profits are declining due to an underperforming mobile segment.
- The company is losing market share, and is expected to face further declines, as competition in the market for Smartphones intensifies and smaller brands continue to outperform Samsung’s phones.
- Samsung’s chip business seems to be doing well and has reported strong growth in its pre-earnings guidance. In order to capitalize on this, the company has made a $15 billion investment in a new South Korean chip plant.
- Share prices have declined by nearly 20% in the past four months and the company has lost almost $45 billion in capitalization.
- Outlook for the stock seems to be bearish and investment is not recommended primarily because challenges in mobile (the main segment for the business) are going to continue.
With Sales In Freefall, Will Samsung Smartphones Go The Way Of BlackBerry And Nokia?
- Samsung warned that Q3 profit could decline by as much as 60% Y/Y. Its smartphone business is the worst performer.
- Smartphones are being hit on the low end by Chinese competitors and on the high end by Apple.
- Samsung's sharp decline is reminiscent of Nokia and BlackBerry, both of which once held commanding market share.
- If sales continue their freefall over the next several quarters, Samsung's smartphones could go the way of Nokia and BlackBerry.
Samsung's Chip Expansion Antagonistic For Micron? Wall Street, 'The Crowd' At Odds
- Wall Street and certain members of the crowd are at odds over Samsung's intentions for its new $15B chip plant.
- Analysts believe Samsung is gearing up to supply explosive demand in memory, in particular, demand for the 2015 iPhone.
- Certain crowd members believe Samsung could attempt to steal share in semiconductors to offset losses in mobile phones. I am riding with the crowd.
- Samsung came out with a profit warning for the third quarter after disappointing in Q2.
- Rivals are pinching the company's market share on both the high and the low end.
- Apple's new iPhone is expected to put even more pressure on Samsung's sales.
- Samsung issued a profit warning, indicating that Q3 operating profit could fall 58%-62% y/y.
- Competitive pressure from AAPL and low-cost Android handset makers is the main driver behind the decline.
- OPM pressure is mostly due to ASP pressure rather than volume decline, suggesting much of the headwind comes from the low-end segment.
- Samsung Galaxy Note prices will drop at a higher rate following a launch based on historical trends.
- Samsung is pressured by competitive dynamics, commoditization and falling smartphone subsidies.
- These factors put Apple in a much better position to gain market share and reasserts why Apple will continue to outperform Samsung as an investment.
- Apple has been able to design and market superior products over time by keeping the vast majority of design and development in-house.
- Also, Apple’s upcoming iPhone 6 and 6 Plus will have a higher blended average selling price, which will drive sales growth in future quarters.
- Samsung shares have fallen 17% over the past year and trade at just 8x 2014 estimated earnings (6x excluding cash).
- Investors are so concerned about the mobile phone business, the current share price implies a valuation of zero. Similarly, investors are concerned about the low dividend and lack of buybacks.
- An activist investor could potentially unlock value through a partial spin off of the phone business and using excess cash to repurchase cheap stock.
- Taking these simple actions could dramatically increase Samsung's stock price. Shares look to have 90% upside.
- Samsung’s first budget Tizen phone may launch in India the last quarter of 2014.
- Google’s alleged mandatory order to OEMs to pre-install 20 Google apps on Android phones is strong incentive for Samsung to redouble its Tizen OS efforts.
- Samsung did right in choosing India for its first Tizen phone. Samsung is still the No.1 smartphone brand in India.
Samsung Needs Galaxy S6 At This Point To Stand Out
Google's Android One Initiative: The Impact On Samsung
- Through Android One, Google is looking to improve the user experience on low-priced smartphones, enticing customers in emerging markets to upgrade.
- We believe the move could pose a threat to Samsung, the world's largest smartphone manufacturer.
- The initiative could potentially compound Samsung's market share woes in emerging countries, where we expect much of the growth in the smartphone market to come from.
- Samsung now reminds me of Apple of about a year ago. Apple stock price increased more than 50% since then.
- Looking past the current events of shrinking market share and lower profits, we find Samsung deeply undervalued.
- Using DCF valuation makes me believe Samsung is a great long-term opportunity.
- Samsung’s smartphone business has gravely suffered from the rapid ascent of Xiaomi.
- Xiaomi displaced Samsung as the top vendor in China. Global expansion plans for Xiaomi means Samsung’s market share in other countries also will likely decline.
- The two biggest mobile carriers in the Philippines now offer free Xiaomi Mi 3 to their post-paid subscribers. Carrier support will add to the massive growth of Xiaomi.
There are no Transcripts on SSNLF.
Wed, Aug. 13, 11:28 AM
- Samsung (OTC:SSNLF, OTC:SSNGY) has partly given in to calls to offer phones with Apple-like metal cases rather than plastic ones: Its new Galaxy Alpha sports a metal frame around its sides. However, the device still has a plastic rear shell that strongly resembles the Galaxy S5's.
- Moreover, unlike the rumored Galaxy F (expected to have a full metal case), the Alpha carries mid-range specs notably worse than the S5's: It has a 4.7" 720p display, 12MP rear camera, and 2GB of RAM.
- Separately, The Verge has posted pictures of Samsung's upcoming VR headset (will use a phone's display/sensors), and states the device will be unveiled at a September event also expected to feature the Note 4, which might also have a metal frame. Past reports have stated Samsung is relying on Facebook's Oculus VR to provide the headset's software.
Tue, Aug. 5, 10:48 PM
- Following untold numbers of lawsuits, injunction requests, court petitions, and billed legal hours, Apple (NASDAQ:AAPL) and Samsung (OTC:SSNLF, OTC:SSNGY) have agreed to drop all suits against each other in Germany, the U.K., Japan, Australia, the Netherlands, France, South Korea, and Italy. The deal doesn't involve any licensing agreement.
- For now, the world's biggest smartphone and tablet OEMs remain at odds in the U.S., but there are signs that battle is also winding down. In June, Apple and Samsung dropped their appeals of an ITC case that led to an injunction on older Samsung phones. The prior month, a CA jury awarded Apple $120M in an infringement suit against Samsung, much less than the $2B it sought.
- Apple settled its patent dispute with Motorola Mobility in May in a deal that didn't feature a cross-license, and agreed to work with Google on "some areas of patent reform." A cross-licensing deal with HTC was struck in 2012.
Mon, Aug. 4, 2:06 PM
- With a 14% unit share on the back of 15M shipments (+240% Y/Y), Xiaomi passed Samsung (OTC:SSNLF) in Q2 to become China's top smartphone OEM, per research firm Canalys.
- Samsung, Lenovo (OTCPK:LNVGY), and Yulong (Coolpad) are each estimated to have ~12% of the market. In Q1, Samsung had 18.3% to Lenovo's 11.3% and Xiaomi's 10.7%.
- Xiaomi has gained ground by offering Android phones with high-end specs at mid-range prices. Successful viral marketing campaigns and a popular custom Android UI (MIUI) also haven't hurt.
- The company just launched a new flagship (the MI4) that starts at $320 unsubsidized, and features a 13MP f/1.8 camera and 5" 1080p display. It's counting on former Google exec Hugo Barra to spearhead an international push; Canalys estimates 97% of Xiaomi's Q2 shipments went into mainland China.
- Xiaomi's "borrowing" of ideas from Apple and other rivals has produced controversy. Not only does Xiaomi's hardware take many design cues from the iPhone, founder Lei Jun has cultivated a Steve Jobs-like image, and ended his MI4 launch presentation with a slide prefaced by Apple's "One more thing..." catchphrase.
Fri, Aug. 1, 6:11 PM
- Microsoft (NASDAQ:MSFT) has sued Samsung (OTC:SSNLF) for alleged breach of contract over unpaid Android royalty payments related to the companies' 2011 licensing deal.
- Microsoft suggests Samsung stopped paying per-device royalties in late 2013 due to the Nokia deal, with Samsung arguing the deal nullifies the 2011 pact. Microsoft wants a ruling on Samsung's claim, and is also seeking unpaid interest.
- Likely at issue: Samsung and Nokia have a patent cross-licensing deal in place for each others' patents, one that was extended for 5 years last November. Though the deal involves payments from Samsung to Nokia, Nokia's phone unit (now a part of Microsoft) has made use of Samsung's IP through it. That opens the door to Samsung arguing a new/separate cross-licensing deal with Microsoft is needed.
- The financial implications of the legal spat could be big: Though struggling a bit lately, Samsung still had a 25.2% Q2 smartphone unit share (per IDC).
- Surging Android royalties led Microsoft's "Windows Phone" revenue to rise $1.2B in FY13 (ended June '13). With Samsung apparently halting payments midway, "Windows Phone" licensing revenue grew by $822M in FY14 to $2.54B. Nokia payments accounted for $382M of the total.
Thu, Jul. 31, 11:18 AM
- Samsung's (OTC:SSNLF, OTC:SSNGY) memory sales were a strong point for the company in Q2: They rose 10% Q/Q and 21% Y/Y to KRW6.92T ($6.7B). But the company also hiked its 2014 DRAM industry bit supply forecast to low-30% growth from a prior high-20%. Samsung itself expects to grow bit production at a high-40% rate.
- Morgan Stanley notes Samsung once forecast mid-20% industry growth, and that it's increasing capex to make another production line DRAM-capable in 2015. MS reported earlier this month Samsung is planning to hike its DRAM output.
- Micron (MU -7.7%), whose shares have soared on expectations a favorable DRAM supply/demand balance will continue, isn't taking the news well. Samsung's production hike is also a negative for SK Hynix (OTC:HXSCL).
- Samsung fell 3.7% overnight in Seoul, though that arguably had more to do with the performance of its mobile ops than its chip ops. Weak high-end tablet sales and smartphone share losses to Chinese OEMs led mobile sales to fall 12% Q/Q and 21% Y/Y to KRW27.5T ($26.6B).
- The company expects 2H mobile sales to grow with the help of seasonality, but also (in what's at least a partial reference to the iPhone 6) cautions competition is set to intensify.
- Samsung's Q2 slides (.pdf)
Thu, Jul. 31, 3:05 AM
- Samsung (OTC:SSNLF, OTC:SSNGY) is planning a few new global smartphone launches to retrieve its lost market share and make up for its first quarterly net loss in almost three years.
- Two high-end smartphones releases are planned within the next six months. "One model will have a large screen while the other will be built using "new materials", says SVP Kim Hyun-joon.
- The company will also introduce new mid-to-low-end models to counter low-cost Chinese competition.
Mon, Jul. 28, 4:26 AM
- Samsung (OTC:SSNLF, OTC:SSNGY) has postponed the launch of the Samsung Z (featuring the new Tizen operating system) which was scheduled to go on sale in Russia during the third quarter of this year.
- The company did not give any future timing to the launch, but cited the need to "further enhance the Tizen ecosystem."
- The delay will be costly to Samsung, which reported softer numbers and missed second-quarter estimates earlier this month.
Wed, Jul. 16, 4:37 AM
- Samsung (OTC:SSNLF) is looking to partner with Under Armour (NYSE:UA) to increase its wearable devices product line, South Korea's Yonhap news agency reports.
- A meeting was stated to have taken place between Lee Jay-yong, the heir of Samsung Group, and Under Armour CEO Kelvin Plank earlier this month discussing ways to combat Apple-Nike's wearable device market share.
- Apple and Nike have been connecting sports wear with smart devices since 2006.
Mon, Jul. 14, 2:04 AM
- Samsung (SSNLF, SSNGY) has temporarily suspended business with its Shinyang supplier factory after finding evidence suggesting that the child labor allegations which surfaced last week could very well be true.
- The accusation was made by the New York-based China Labor Watch which reported several cases of underage workers at the facility.
- “If the investigations conclude that the supplier indeed hired children illegally, Samsung will permanently halt business with the supplier,” announced the South Korean company.
Thu, Jul. 10, 3:50 AM
- Samsung (SSNLF, SSNGY) is facing new child labor accusations at its Shinyang supplier factory in China.
- The allegations were made by the New York-based China Labor Watch after finding several cases of underage workers at the facility. The factory seems to employ children and underage students during busy seasons, generally hiring them for three to six months.
Wed, Jul. 9, 11:58 AM| 13 Comments
Wed, Jul. 9, 10:18 AM
- Morgan Stanley reports Samsung (SSNLF, SSNGY) plans to hike its DRAM output. Micron (MU -3.5%), whose shares have risen over 6x from their fall 2012 lows, is selling off in response. Peer SK Hynix (HXSCL) fell 4.1% in Seoul.
- Digitimes recently reported Samsung is thinking of building a new DRAM fab in 2015, as industry consolidation and strong mobile and server-related demand keep prices high. The site also reported spot prices for 4Gb DDR3 DRAM chips could rise to $4.80-$5.00 in Q3, after rallying to an 18-month high of $4.35 in late June.
- TrendForce estimates Samsung had 35.5% of the global branded DRAM market in Q1, SK Hynix 28.2%, and Micron 28%.
- This morning, SA author David Alton Clark argued Micron investors should tread carefully at current levels, given the DRAM industry's historical cyclicality.
- Previous: Samsung reportedly planning to hike DRAM contract prices
Tue, Jul. 8, 4:40 AM
- Samsung (SSNLF), Intel (INTC) and Dell have teamed up to create a standard by which household gadgets communicate with each other, called the Open Interconnect Consortium. The partnership also includes chipmakers Broadcom (BRCM) and Atmel (ATML).
- The new consortium will rival the AllSeen Alliance, a similar framework supported by Qualcomm (QCOM), LG (LGEIY), Microsoft (MSFT) and other companies.
Tue, Jul. 8, 3:03 AM
- A Samsung Electronics (SSNLF) factory in Brazil was robbed yesterday, after 20 thieves stole $6.4M of cellphones, tablets and other products. The company is hoping that insurance will minimize the cost incurred from the stolen inventory.
- The heist is also a setback for Brazil, which has been trying for years to draw more electronics makers to do business in the country. Besides for the high employment costs and taxes in Brazil, added security concerns can now have some manufacturers thinking twice.
- ETFs: BRXX, BRAQ
Mon, Jul. 7, 11:43 PM
- 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.
Mon, Jul. 7, 2:59 AM
- Samsung (SSNLF) is facing a tough time on all fronts, as competition from cheaper models and the launch of the iPhone 6, will likely cause profit to decline again this quarter. Chairman of the group, Lee Kun-hee, also suffered a heart attack in May, leaving the company without a leader and unclear succession.
- According to a Thomson Reuters poll, the company is expected to say on Tuesday, that earnings fell 12.6% for the second-quarter. Previously, CFO Lee Sang-hoon announced that the company's Q2 results "doesn’t look too good."
- As a result of this year's 5% stock drop, Samsung says it will compensate investors by boosting dividends.
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