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Buyback Cheers Investors But Samsung Results Mixed

Much of the excitement over Samsung’s most recent earnings report centered on the roughly $10 billion buyback of shares — a strategy the company said will address an undervalued stock — but the real news was the fact that the company posted its first year-over-year profit growth in two years.

Scratch that. Actually, the real news was that the company is making real money, it seems, everywhere but in mobile — which, though in the black and doing better than a recent nadir, still has a way to go to regain footing — just as the overall smartphone market is tipping toward ennui.

[bctt tweet=”Samsung is making real money, it seems, everywhere but in mobile.”]

That overall company growth, with third quarter operating profit up 82 percent to roughly 7.4 trillion won, was in line with Samsung’s guidance and was buoyed by strong component sales through its chip division (and lifted, in turn, by demand for smartphone makers).

The top line for the company at large grew by nearly 9 percent to 51.7 trillion won, better than Wall Street projections of 50.7 trillion won. Net income, excluding minority interests, was 5.3 trillion won, a little below the 5.4 trillion consensus.

Of special interest to the payments and mobile commerce industry, the Samsung mobile division showed its first net income growth in two years, up 37 percent to 2.4 trillion won year over year. That growth came on the heels of strong Galaxy Note 5 sales, but also, according to management, from demand for lower-end mobile devices. Yet, the recent results mark a decline sequentially, due in part to the price cuts in the S6 and S6+ models (and that, of course, was due to the ongoing competition with the iPhone).

In terms of units, the total handset shipment was 105 million in the quarter, and tablet shipment was 8 million units. Mobile’s outlook: fourth quarter mobile profits should stay roughly the same even as the blended ASP should go up from the most recent $180 level, which indicates at least some pressure from competition and spending.

Though sanguine about the fundamentals in place for the company, specifically in reference to mobile devices (at least its own positioning in that market), management stated that earnings will slip this quarter, due to the impact of unfavorable currency conditions, which had been favorable in the third quarter, adding 800 million won to profit. And, added management, the global smartphone market will likely slow next year.

And although not specifically called out in terms of potential financial contribution, management, in response to an analyst question about Samsung Pay adoption in the United States, said that the platform’s “usage rates are far exceeding our original expectations in the U.S. market … Also, we have completed our talks with Verizon as of last week, Oct. 21, so now we will be opening our Samsung Pay service through all of the four major operators in the U.S. market.”

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