Monday, 8 July 2013

Samsung has it problems. It has sold too many mobile phones.

You would think that of all the smartphone makers, Samsung is the one with the least problems on its mind. And it's not.

Since March, about 20 billion usd has been wiped off its value and recent warnings that profits will be lower than expected are causing market issues. That warning is, I kid you not, 8.3 billion usd profit in the second quarter and up a staggering +47% on last year. But it's not enough. Shares have declined circa -18% in the last month.

It has a 33% market dominant mobile phone share and smartphones account for about 74% of profit.

The main issue here is market saturation. Mobile phone sales are slowing - well, doesn't everyone have one - and more and more they need bigger advertising/marketing pushes which cost more and more money. So the investor confidence and outlook in the mobile phone sector is declining. Blackberry's problems typify this and HTC profits declined over -80% year on year.

Samsung are now reliant on mobile phones with their household entertainment products under more threat through reductions in consumer spending (recession) and major price competition.

Samsung have been and continue to be a hugely successful, massively profitable company. Their new Galaxy phone recently sold 10m units within a month of launch and yet, their faced with a serious decline.

Purely and simply because they're now in a market which has reached saturation and they can't show that they're able to move it along. Very reminiscent of Microsoft - a great company once that dominated the wrong space.

Interesting. Inspiration and Innovation required. Remember Nokia.