Samsung Galaxy S6 struggles see company miss profit estimates

Samsung’s seventh straight profit drop comes as Galaxy S6 phone sales have fallen short amid Apple iPhone 6 dominance.

A woman walks past a billboard of the Samsung Galaxy S6 and S6 edge at a shop in Seoul. AFP

Samsung posted second-quarter profit that missed analysts’ estimates as shortages of new smartphones made it harder to lure customers from Apple’s iPhone and cheaper devices made in China.

Operating income fell 4 per cent to 6.9 trillion won (Dh22.4bn) in the three months ended June, the company said in a filing Tuesday. That compares with the 7.2tn won average of 33 analyst estimates compiled by Bloomberg.

Samsung’s seventh straight profit drop comes as Galaxy S6 phone sales have fallen short after winning early praise as a device that could attract users that had shifted to Apple’s iPhone 6. Production constraints for the model with a curved display have led to shortages, trimming sales of the device and forcing the company to rely more on its chip unit for earnings.

“S6 didn’t sell as well as the market had hoped for, partly because of continued outperforming of iPhones combined with the supply constraint,” said Greg Roh, a Seoul-based analyst at HMC Investment Securities.

“Sales sharply missed the market expectation, which implies that overall technology industry demand for smartphones, TVs and PCs is weakening.”

Sales were 48tn won in the quarter, the company said today. That compares with the 53tn-won average of 37 analyst estimates.

The company’s shares were little changed at 1,229,000 won as of 9.02am in Seoul. The stock has fallen 7.2 per cent this year compared with a 7.9 per cent gain in the benchmark Kospi index.

Samsung didn’t provide net income or details of division earnings today. Audited results are scheduled for later this month.

Operating income at the mobile unit probably fell about 28 per cent to 3.2tn won on sales of 28.7tn won, according to the median estimate of six analysts surveyed by Bloomberg News.

Samsung Securities last month lowered its shipment estimate for S6 models to 45 million units this year from 50 million previously. Total smartphone shipments probably were about 78 million units in the second quarter, down from 85 million units sold in the previous quarter, it said in a June 24 report.

“The initial response to S6 smartphones wasn’t all that bad, but Samsung failed to fully address the market demand,” analysts at KB Investment & Securities said in a July 3 report. Samsung underestimated demand for the Edge model, resulting in a “marketing misstep,” he said.

Samsung has predicted record sales of the Galaxy S6.

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