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Korean Security Firms have Gone Negative on Samsung

10A News - Rumor
On Monday we posted a report titled "Samsung's Galaxy S5 is Confirmed a Dud & May Hurt Financials." In that report we noted that Korea's UDN reported that Samsung's supply chain sources were stating that Samsung's goal was to ship 21 million Galaxy S5 units this quarter and that they'll likely ship closer to 15 million which is a 25% target miss. That would be a huge miss. Now Korean security firms have gone negative on Samsung. A new Korean report published this morning states that "Samsung Electronics' profitability is expected to deteriorate in the second quarter of this year, unlike the previous prediction."

 

The report further notes that "Securities firms' quarterly operating profit estimates have been adjusted downward, with the most optimistic estimate being 9 trillion won (US$8.8 billion) and the least 7.9 trillion won (US$7.7 billion). The wide gap implies the difficulty in prediction. What is noteworthy though is that the most pessimistic estimate dropped toward the end of June. Last month, Korea Investment & Securities adjusted its estimate from 9.3 trillion won to 8.3 trillion, won and Samsung Securities cut its forecast from 9.4 trillion won to 8.5 trillion won." These are huge drops.

 

Research analyst Song Myung-sup at HI Investment & Securities stated that such negative forecasts can be attributed to the IT & Mobile Division, which accounted for over 60 percent of the electronics giant's sales and business profits last year. The division's smartphone and tablet PC shipments are estimated to have declined significantly in the current quarter. "According to our forecast, smartphone and tablet PC shipments have fallen at least 10 percent and approximately 20 percent from the preceding quarter, respectively."

 

Until recently, market experts said that the new flagship smartphone Galaxy S5 would improve Samsung Electronics' quarterly performance. However, business conditions are not favorable for the company as of now.

 

Chinese manufacturers such as Huawei, Lenovo, and ZTE are increasing their presence in their home turf, which is the largest in the world, with mass-market phones. ZTE is recruiting experts for overseas market penetration, too.

 

Under the circumstances, concerns are rising over a possible negative impact on the quarterly business results of the other subsidiaries of Samsung, such as Samsung SDI and Samsung Electro-Mechanics.

 

The only bright spot for Samsung appears to be coming from both their DRAM and NAND flash shipments by the semiconductor business unit which are forecast to have increased. Though it may not be enough to offset other loses in key areas like smartphones and tablets.

 

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