While Apple (NASDAQ:APPL) posts profits that beat all-time records in the history of corporate America, its Korean rival Samsung (KRX: 005930) continues to struggle with profitability as its most recent earnings demonstrate.
In its entirety Samsung posted a profit of $4.87 billion on $48.6 billion in revenue. This represents a 36% dip in profit and an 11% dip in revenue from the same time last year.
Breaking down the earnings results from Samsung’s specific divisions, things begin to look bleak. Samsung’s closely watched mobile division — once a cash cow for the company — posted for the quarter a year-over-year decline of 64% for operating profit. In dollar figures the mobile division, which also includes IT services, posted $1.8 billion in profit on $24 billion in revenue.
Samsung declined to provide exact figures for phone sales.
One bright spot for the company is its semiconductor division, which posted an operating profit of $4.88 billion in line with guidance provided by the company.
Old player in a new economy
When Samsung first entered the smartphone market, it portrayed itself as something of an underdog offering choice in a market that was monopolized by Apple. This was, however, in an era before Xiaomi was a household word and the market wasn’t saturated with new entrants such as Micromax pushing low-price high-functionality phones.
If Samsung wants to reverse its downward trajectory in 2015, it needs to invest heavily in developing new handsets that can compete with Apple in the high-end space and Xiaomi in the low-cost arena. Both the Galaxy Note 4 and S5 were underwhelming devices, seen as simply an incremental upgrade. Samsung will have to do better than this in 2015 if it wants to retain its former status and profitability.
