South Korean tech giant Samsung Electronics Co Ltd onTuesday lowered its earnings guidance for the year as its second quarter results fell below expectations due to shortage of its latest smartphone and falling sales in other market.
A Reuters report noted that Samsung remains on track to recover from its 2014 performance, a three year low, but is unlikely to repeat its strong growth at the beginning of the century with new competition coming in and weakening demand in China and Europe.
Samsung said operating profits in the second quarter likely reached 6.9 trillion won or $16.3 billion, which is smaller by 4 percent than last year. The company said it was the fourth straight quarter of growth, but the seventh year the figure declined.
The company also expects revenues to fall by 8.3 percent to 48 trillion yen, but did not give specifics, Reuters said. The full report of Samsung's second quarter performance is expected to be released late this month.
Despite this guidance, Samsung shares still gained in the stock market as investors were expecting an even worse performance, Reuters added.
Another report on Bloomberg said the profit drop comes as Samsung Galaxy 6 phone sales failed to meet expectations and lure away Iphone 6 users. It added that supply had been tight due to production constraints, which limited shipments and forced the company to rely on other businesses for earnings.
Reuters said Samsung has fixed the production issues regarding the Galaxy 6, it will have to contend with Apple again, which is set to unveil a new Iphone in the third quarter.
Reuters added that the company's performance have also been affected by economic slowdowns in South Korea and China, the world's largest market for mobile phones. China's stockmarket has been taking a beating the past few weeks with investors concerned about the rapid decline in prices, while the spread of a deadly flu strain and an extended dry spell have hit Soouth Korea.
