Samsung profits reach record but competition intensifies

 

Samsung today saw shares drop despite record profits of £4.2 billion as the South Korean giant warned of slowing demand and pressure on prices due to fierce competition in the smartphone and tablet market this year.

The shares slipped 1.4% but are still at close to a record high after soaring 30% in the last year on the strength of bumper sales of the Galaxy S range of smartphones, which have hit more than 100 million in four years.

Samsung said: “The furious growth spurt seen in the global smartphone market last year is expected to be pacified by intensifying price competition, compounded by a slew of new products.

“In the first quarter, demand for smartphones in developed countries is expected to decelerate, while their emerging counterparts will see their markets escalate with the introduction of more affordable smartphones and a bigger appetite for tablet PCs throughout the year.”

The new wave of Chinese manufacturers and a resurgent Nokia, which is still strong in low-end phones, threaten both Samsung and Apple, the market leaders.

The performance of Samsung, the world’s biggest maker of smartphones, was still resilient, and compares favourably with arch-rival Apple, whose shares slumped 12.3% last night, following worse-than-expected sales of the iPhone5 and a miss on profits on Wednesday.

Samsung said it would not increase spending on investment in 2013, keeping it at last year’s levels.

Samsung has been one of the electronics industry’s most aggressive spenders, hiking capital expenditure every year since 2004 except 2009 to meet soaring demand for its array of consumer electronics and mobile devices.

Lee Se-chul, a Seoul-based analyst at Meritz Securities, said Samsung remained in a strong position: “Smartphone shipments will continue to grow even in the traditionally weak first quarter, as Samsung has a broader product line-up and Apple appears to be struggling in pushing iPhone volumes aggressively.”

Samsung is expected to get another sales boost from the launch of the Samsung Galaxy IV smartphone in the spring.

Samsung did not give a breakdown of smartphone sales but is estimated to have sold 63 million smartphones in the last quarter, including 15 million Galaxy S IIIs.

Apple sold 47.8 million iPhones over the same period.

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