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Samsung warns of tough year ahead

Samsung chief says that 2016 will be a challenging year for the vendor as it transitions focus from hardware to software

Samsung shares are down more than 4% after the electronics giant warned that the year ahead would be challenging.

Co-chief executive Kwon Oh-Hyun told employees and press in the company's annual New Year's address that weak global economic growth, combined with increased competition, would pose challenges for the firm in the year ahead.

"The territories of industries are collapsing," Kwon said. "We have to compete in a new way that we've never experienced in the past.”

Despite being the largest global phone manufacturer, Samsung has been feeling increased pressure from both ends of the smartphone spectrum. On the one hand, they are being challenged by the vast array of budget Android devices flooding the market, and on the other - Apple, with its new large screen iPhones.

While shipments of the new Galaxy S6+ have shown some promise, Kwon Oh-Hyun said that the firm’s reliance on hardware sales could prove problematic.

“The competition landscape is changing to software and platforms, so we need to build a new system and competence,” Kwon said.

Samsung saw more than $8bn wiped of its market value in 2015 as sales of its flagship devices ground to a halt. The South Korean firm is expected to release its preliminary fourth-quarter earnings on Friday. Analysts are expecting Samsung to report its lowest profits in four years.

Tech market hit by China fears again

Samsung isn’t the only publicly traded company to kick off the New Year with a dip in share price; in fact, the vast majority have.

The first trading day of 2016 is off to a terrible start, thanks  - once again - to the slowing growth of China’s economy and the geopolitical turmoil in the Middle East.

The Nasdaq composite was down 2.2% in pre-market trading, while the Dow Jones is down more than 360 points, or 2% and the S&P 500 stock index was 1.9% lower.

Richard Holway of TechMarketView said that tech was ‘not immune’ from the many geopolitical issues, but felt that technology stocks were still the place to be.

“I still think that tech – particularly the ‘tech-enabled’ bit of tech - will outperform in the year ahead,” Holway said. “Profitable, cash-generative companies will out-perform. In the established players, we will see a continuation of the consolidation trend which will undoubtedly provide rich pickings for savvy investors.”

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