Samsung shares fall despite increased sales

Samsung misses analyst expectations in its pre-earnings guidance for the second quarter, leading to fears for investors

Samsung's sales may be up, but the mobile phone maker has failed to reach analyst estimates in its latest pre-earnings guidance.

The South Korean firm has predicted sales of 57tn won (£33bn) and operating profits of 5.5tn won for the second quarter of 2013, giving the markets a heads up on its results due on 26 July.

However, despite this showing a rise of over 4tn won in sales from the previous quarter, analysts had predicted operating profits of closer to 10tn won. By missing the mark, Samsung’s share price fell by almost 3% this morning – and around 17% since the beginning of June.

The fear is around its smartphone business, led by the Samsung Galaxy S4. Although sales are still expected to be strong, they are also expected to have slowed, with JPMorgan claiming the figure would be between 20% and 30% lower in 2013 than it had first predicted. This would lead to shipments of 60 million flagship handsets during 2013, rather than the previous 80 million figure that was touted.

This estimate was made in June following the launch of the lower-end, slimmed down version of the S4 – the Galaxy S4 Mini – which Samsung hoped could compete against its rivals, such as Apple, in emerging markets. 

Instead, the announcement sent fears through its investors about lower profit margins and led to the firm having to meet with them in an attempt to quell fears.

During its last results call in April, where it announced overall profits were down from 56tn won to 52.87tn won sequentially, Samsung admitted it expected the market to stall.

“Looking ahead, Samsung anticipates smartphone sales to stay flat in the second quarter, but to pick up again in the second half of the year,” read a statement at the time. “As more mid- to low-end mobile devices enter the market and new premium products are rolled out, the race for market share will intensify.

“The company will strive to remain competitive amid difficult conditions by expanding the line-up of smartphones and tablets this year, starting with Galaxy Note 8.0 and the flagship Galaxy S4 smartphone.”

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