Samsung Sees Improved Profit, Galaxy S6 May Boost Turnaround In 2015

Samsung Electronics Co. Ltd. forecast better operating profits and margins for its fiscal first quarter versus the previous one, and analysts see the Galaxy S6 that goes on sale this week aiding a turnaround after the largest smartphone maker in the world lost ground to Apple Inc. and Xiaomi Inc. last year.

Consolidated operating profit for the three months ended March 31 are expected to rise to 5.9 trillion won ($5.44 billion), Samsung forecast on Tuesday. That’s a 30.5 percent drop from the year earlier figure, but a sequential increase of 11.5 percent from the previous quarter.

Operating margins are expected to improve to 12.6 percent from 10 percent for the previous quarter, but were lower than the year-earlier figure of nearly 16 percent. Consolidated sales will be 47 trillion won for the fiscal first quarter of 2015, according to the company, which will report its detailed earnings in the coming weeks.

Investors are hoping Samsung’s latest flagship phones Galaxy S6 and S6 Edge will aid a turnaround even as the company makes gains at its semiconductor unit -- rumored to be the processor supplier for Apple’s iPhone 7 -- and personal computer business, which has consolidated its No. 2 position, according to Gartner Inc.

“We believe that the coming couple of quarters will be even better for Samsung,” said Tarun Pathak, a senior analyst in India at Hong Kong based Counterpoint Technology Market Research, who expects the S6 models to sell more than any of the previous premium smartphones from the company. “Galaxy S6/S6 Edge will help Samsung to win back market share in the premium smartphone segment.”

Counterpoint Research has projected that Samsung will sell more than 50 Million units of the Galaxy S6 and S6 Edge combined this year in sell-through terms. This is more than the previous bestseller Galaxy S4, which sold around 45 Million in its first year, Pathak said in an email to International Business Times on Tuesday.

Samsung is betting the S6 models -- which the company has said have received record preorders -- will bring back the type of popularity it last enjoyed probably with the Galaxy S3 and S4, smartphones that remain popular in markets such as India.

India, the world’s largest smartphone market after the U.S. and China, epitomizes Samsung’s woes, where on the one hand there is a huge demand for smartphones, while on the other buyers are extremely price sensitive as carriers don’t subsidize handsets.

Over the last six months, Samsung has responded to cheaper phones from local competitor Micromax Informatics Ltd. and Chinese rivals Xiaomi Inc. and Lenovo Group Ltd., by slashing the price of its S3 and S4 smartphones on Indian online shopping site Flipkart.com and Amazon.com Inc.’s Indian site.

The company has also launched competitively priced smartphones equipped with its latest technologies at different bands -- from the entry-level Z1 running on its own Tizen operating system in India to the J1 and A3, A5 and A7 handsets running on the more popular Android OS globally.

It launched the S6 in India with a slew of offers and financing schemes to entice people to preorder the handsets that will go on sale in the country this week.

The S6 also gives Samsung a much needed breather by differentiating its design at a time when competitors such as Xiaomi are facing a supply crunch. Samsung’s competitive advantage in flexible OLED displays and unibody design give the S6 phones a hardware advantage, “which other Android brands will find difficult to replicate immediately,” Pathak said.

He added: “We can see vendors jumping into the trend by the later part of 2015 which gives Samsung a much needed head start.”