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Samsung Warns of Lower Third-Quarter Earnings

Falling margins on smartphones and weak sales of TVs and displays help drag down Samsung's earnings, due out later this month.

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Samsung Electronics warned Tuesday that its third-quarter earnings would fall below market expectations, amid heightened competition in the smartphone market, decreased shipments of displays and falling TV prices.

The company said it would report an operating profit of $3.8 billion for the quarter ending in September — a decline of nearly 60 percent from the same time a year earlier. Sales fell to $44 billion, off 20 percent from a year ago.

The preliminary guidance, which Samsung issued ahead of its quarterly report, due later this month, failed to meet the $5.2 billion average profit estimate of 43 analysts pulled by Thomson Reuters.

The South Korean electronics giant said that while smartphone shipments increased, its operating margins fell because of higher marketing costs, fewer shipments of high-end phones and a lower average selling price for the devices.

The company said it is responding with a new smartphone lineup that will include new midrange and low-end devices, which would make Samsung’s products more competitive in markets such as China.

Samsung had hoped to revitalize its phone business in September with the introduction of new models. It said it “cautiously expects” smartphone shipments to grow in the fourth quarter.

The display business suffered in the third quarter amid weaker demand for mobile products.

Samsung’s consumer electronics unit experienced seasonal weakness in the quarter, because of lower prices for TVs and an “earlier than expected” end to the summer sales season of home appliances.

The company’s memory business improved, with strong demand from personal computers and servers. The company said prices have stabilized as supply has tightened.

This article originally appeared on Recode.net.

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