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What's To Blame For Samsung's Sales Slump?

Smartphones may be behind the most recent earnings estimates offered up by South Korea’s technology titan Samsung Electronics.

As reported Tuesday (July 7) by The Wall Street Journal, second quarter projections put out by the company said it expects to earn 6.9 trillion Korean won ($6.1 billion) in the period from operating profit, a figure that marks a 4 percent decline from last year. Revenues may have slipped at an even faster rate, down more than 8 percent to 48 trillion won ($42.2 billion). WSJ noted that sales of the company’s new flagship phones have been “significantly worse” than expected. That slump in the smartphone market would be enough to offset the growth that should come from other segments, most notably semiconductors. This would mark the seventh consecutive quarter of operating declines.

Samsung, for its part, did not break down estimates by business segment, and final numbers, along with attribution by product line, are slated to be announced later this month.

Among the key smartphone models that evidently have missed expectations would be the Galaxy S6 and the newer model, which has been dubbed the Galaxy S6 Edge and features a curved screen. Though both have garnered praise since their April 2015 launches and advance orders saw strength, Samsung may have “badly miscalculated" expectations from consumers, noted WSJ.

Sources told the business publication that Samsung looked to sell four Galaxy S6 smartphones for every S6 Edge that it sold — and ramped up production in line with that expectation. But demand was in reality closer to even for the two models, according to the source. Hence, there was a glut of produced and unsold Galaxy S6 phones, especially white ones, while demand was unfulfilled by Edge production.

Samsung executives had said production would be increased to meet Edge demand through the end of June, and manufacturing operations were redirected to produce Edge phones. Yet, noted WSJ, the company may have missed initial consumer opportunity as demand peaks just a few months after the phone debut.

 

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