By Kim Yoo-chul
Samsung Electronics reported Tuesday that its operating profit for the second quarter fell 25 percent from a year earlier to 7.2 trillion won.
The company, however, expects an improvement in the third quarter on expectations of a rebound in demand for smartphones.
In a preliminary earnings guideline statement, the technology giant said revenue during the April-June period was estimated at 52 trillion won, 9.5 percent down from 57.46 trillion won a year ago.
The quarterly revenue in the latest period was the lowest since the second quarter of 2012.
The profit dip had been widely expected, but not by this much.
Samsung said the profit drop would be "temporary" and stressed that its impact would be limited. "This is not a structural issue," the statement said.
A strengthening won, a sales decline for smartphones and tablets, and increased expenses for marketing were cited as reasons for the fall.
While the second half of 2014 will also be challenging as Samsung needs to address many pending issues, the company and market analysts said the second half will be much better
Samsung said it expects a more positive outlook in the third quarter as it's been set to release the Galaxy Note 4 and smartphone variants.
Meanwhile, the company is expected to spend less on marketing compared to the second quarter.
The smartphone business accounted for about 70 percent of the company's profits last year.
"Because Samsung is shifting its focus towards low-end smartphones, the second quarter wasn't that impressive. But the company will be much better in the third quarter," said Daishin Securities analyst Park Ki-beom.
Lee Min-hee from IM Investment Securities said the profit dip was due to a consumer shift to budget mobiles. As the new order prevails, Lee said the profit curve won't be steep.
Bernstein Research, an independent research firm owned by AllianceBernstein, said that fear of an implosion of Samsung's mobile business was receding because of the company's unrivalled scale, cost competiveness and brand, and distribution.
"We believe Samsung is well positioned to continue to grow handset volumes profitably even at lower price points," Mark C. Newman, a senior analyst at Bernstein said.
Samsung is diversified as its businesses range from chips, flat-screens, televisions to home appliances. It expects more profit from the semiconductor business and TVs during the third quarter, which is enough to offset rising worries with investors.
"We expect to see increased display panel sales in the current quarter," said the company.
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The company, however, expects an improvement in the third quarter on expectations of a rebound in demand for smartphones.
In a preliminary earnings guideline statement, the technology giant said revenue during the April-June period was estimated at 52 trillion won, 9.5 percent down from 57.46 trillion won a year ago.
The quarterly revenue in the latest period was the lowest since the second quarter of 2012.
The profit dip had been widely expected, but not by this much.
Samsung said the profit drop would be "temporary" and stressed that its impact would be limited. "This is not a structural issue," the statement said.
A strengthening won, a sales decline for smartphones and tablets, and increased expenses for marketing were cited as reasons for the fall.
While the second half of 2014 will also be challenging as Samsung needs to address many pending issues, the company and market analysts said the second half will be much better
Samsung said it expects a more positive outlook in the third quarter as it's been set to release the Galaxy Note 4 and smartphone variants.
Meanwhile, the company is expected to spend less on marketing compared to the second quarter.
The smartphone business accounted for about 70 percent of the company's profits last year.
"Because Samsung is shifting its focus towards low-end smartphones, the second quarter wasn't that impressive. But the company will be much better in the third quarter," said Daishin Securities analyst Park Ki-beom.
Lee Min-hee from IM Investment Securities said the profit dip was due to a consumer shift to budget mobiles. As the new order prevails, Lee said the profit curve won't be steep.
Bernstein Research, an independent research firm owned by AllianceBernstein, said that fear of an implosion of Samsung's mobile business was receding because of the company's unrivalled scale, cost competiveness and brand, and distribution.
"We believe Samsung is well positioned to continue to grow handset volumes profitably even at lower price points," Mark C. Newman, a senior analyst at Bernstein said.
Samsung is diversified as its businesses range from chips, flat-screens, televisions to home appliances. It expects more profit from the semiconductor business and TVs during the third quarter, which is enough to offset rising worries with investors.
"We expect to see increased display panel sales in the current quarter," said the company.
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