Samsung's mobile profit sinks 74 percent

Staff Writer
Columbus CEO

SEOUL, South Korea (AP) — Samsung Electronics Co. said Thursday operating profit from its smartphone business plunged 74 percent in the third quarter to its lowest in more than three years amid slowing sales of its flagship Galaxy handsets.

The drop battered the South Korea company's overall quarterly net profit, which tumbled 49 percent to 4.2 trillion won ($4 billion) — the lowest since the first quarter of 2012, but above market expectations. Analysts polled by Factset had predicted net income of 3.7 trillion won.

Operating income from its mobile business, which previously had contributed more than 60 percent of its entire profit, fell to 1.75 trillion won ($1.66 billion) from 6.7 trillion won a year earlier.

That was the lowest since the third quarter of 2011. Samsung's profit from smartphone business never sank below 2 trillion won until the last quarter.

Quarterly sales fell 20 percent to 47.4 trillion won while operating income shrank 60 percent to 4.1 trillion won.

Samsung had warned earlier this month that its handset profit declined despite a marginal shipment increase. Analysts said the Galaxy S5 smartphone launched in April did not sell well while many consumers held off upgrading their phones instead waiting for new iPhones.

For the first time since the third quarter of 2011, the division that makes semiconductor products reported a larger quarterly profit — 2.3 trillion won — than the mobile communication division.

Samsung projected that its earnings would grow in the current October-December quarter, driven by the memory chip business. But it was uncertain whether its smartphone business would recover because it may have to increase marketing expenses to compete with rival handsets and to clear out inventory before the start of 2015.