Samsung will be "adjusting" prices for the S6 and S6 Edge to maintain sales growth, the company said Thursday after reporting that net income, excluding minority interests, fell to 5.63 trillion won ($4.9 billion) in the three months ended June. That missed estimates and prompted the biggest decline in shares in four months.
Samsung will add more middle- and low-end models, and cut spending in the phone division, it said. The company will unveil its next Note device on Aug. 13, earlier than the company's usual schedule. Apple typically releases a new product in the second half of the year.
The South Korea-based company also warned of slowing growth in the device market and tepid demand for memory chips.
Samsung's global smartphone market share fell more than 3% points in the second quarter amid surging sales of Apple's iPhones and tougher competition from Chinese vendors including Xiaomi Corp. It misread demand for the S6 models released in April, failing to produce enough three-sided screens for the Edge while the regular version struggled against the bigger iPhones.
"I don't see a clear answer for its smartphone business," said Marcello Ahn, a Seoul-based analyst at Quad Investment Management Co. "The vacuum of its business momentum will persist throughout this year and even into next year, giving investors less reason to snap up shares."
Operating profit at the mobile phone unit slumped to 2.76 trillion won from 4.42 trillion won a year earlier. Samsung sold 89 million handsets, with smartphones accounting for more than 80% of those.
Profit at Samsung's semiconductor business, which makes memory chips and applications processors, was 3.4 trillion won, compared with 1.86 trillion won a year earlier.
The chip division was the biggest beneficiary of the new S6 as its mobile unit switched to in-house applications processors and modem chips instead of those from Qualcomm Inc.
"I don't think we can promise a bullish outlook for that as well since more chip supply from rivals is expected in the second half, while demand for personal computers and smartphones will keep dwindling," Mr. Ahn said.
~ Bloomberg News ~