Samsung Predicts Huge Profit Increase

Samsung Electronics has done its bit to cheer up Wall Street, after it dramatically raised its profit forecast for the January to March quarter.

The upgraded forecast is all the more remarkable, because the improved financials for the South Korean electronics giant do not reflect the sales impact of its soon-to-be-released flagship Galaxy S4 smartphone. The increase also took place in the post-Christmas quarter, which traditionally is a quiet sales period.

Profit surge

Samsung unveiled its new flagship smartphone, the Samsung Galaxy S4, at an event in New York in March. The Android-based device will be released in the UK on 26 April.

Yet despite the April arrival of its new flagship device, Samsung seems to have profited handsomely from sales of its existing smartphone portfolio. So much so that Samsung predicted in its pre-earnings guidance that its operating profit will rise by a staggering 53 percent to 8.7 trillion won (£5bn), compared to 5.7 trillion won (£3.3bn) in the same year ago period.

Sales meanwhile are expected to hit 52 trillion won (£30bn) for the same period. Samsung will officially reveal its consolidated financial results on 26 April.

According to a poll of 42 analysts by Thomson Reuters, Samsung’s profit forecast had been for 8.3 trillion (£4.8bn).

It seems sales of its current S3 and the Galaxy Note, as well its mid-tier smartphones, helped the electronics giant extend its reach beyond the ‘premium’ sector and into the mid-tier market. In January, it said it was selling 190,000 SIII handsets every day.

Android powerhouse

Samsung has the advantage of offering a huge portfolio of mobile devices (30 plus models) that cover most price points. Reuters quoted five unnamed analysts as saying that the company likely sold 68-70 million smartphones in the latest period, up from 63 million in the December quarter.

This is in stark contrast to Apple, with the same analysts stating that iPhone shipments likely slumped some 30 percent to the 30 million range from 47.8 million in the previous quarter.

Besides the inevitable comparison to Apple, however, Samsung’s recent success could prove worrying for management teams at Nokia and Blackberry, as these two mobile makers seek to exploit the mid-tier market to recover some of their lost share of the premium smartphone sector.

Samsung is being helped by its domination of the Android smartphone market. Last month, Samsung boss J.K. Shin pointed to Android’s strategical importance when he claimed smartphones running Windows Phone were not selling well. Shin also said Samsung prefers to release devices running Android over other operating systems.

The company hopes to ship in excess of 400 million smartphones in the next 12 months and has high hopes in the enterprise market, he said. However it appears as though Windows Phone will not be central to that strategy.

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