Beleaguered Samsung faces more cost cuts, management shake-up

“Samsung Electronics Co. is bracing for more cost cuts and a potential management change later this year as it struggles to halt a sharp slide in profits,” Min-Jeong Lee reports for Reuters. “The world’s biggest smartphone maker by shipments said Tuesday its third-quarter operating profit likely fell as much as 62% from a year earlier, hit by weak smartphone sales. This would mark its fourth consecutive decline in operating profit and its steepest year-over-year decline in the past five years.”

The struggling chaebol “is facing stiff competition from Chinese handset makers who are aggressively launching cheaper phones. In the high-end smartphone market, it is battling Apple Inc., which last month unveiled new iPhones with bigger screens that are popular with consumers,” Lee reports. “Samsung’s weak guidance further highlighted the company’s over-dependence on the mobile division to generate earnings growth. ‘Samsung’s memory chip business is now the only division that is doing well,’ said C.W. Chung, an analyst with Nomura in Seoul. ‘Until the company’s mobile unit is able to recover, continued strength in the company’s chip business will be key.’”

“Critics said Samsung is struggling to figure out its growth strategy beyond its recent focus on smartphones, software and wearable devices,” Lee reports. “Uncertainties about its future also loomed as Samsung grapples with the transition of power to a new generation. Chairman Lee Kun-hee remained in the hospital following a heart attack in May. While Samsung said Mr. Lee’s health was improving, critics said the company apparently lacks visionary leadership to steer it into new growth areas, especially at a challenging time.”

“Samsung’s mobile business–which generates more than 60% of its operating profit–earlier this year forced hundreds of senior managers to take a 25% cut in their first-half bonuses earlier this year, according to people familiar with the matter,” Lee reports. “Now, executives and senior managers are bracing for more cost cuts, a person familiar with the situation recently said. In a surprise move last month, Samsung quietly shifted about 500 of its software engineers from its mobile unit to other parts of the company.”

“Expectations for the third quarter had already been low as sales of Samsung’s flagship device, Galaxy S5, have been weaker than forecast, analysts said,” Lee reports. “Samsung also sounded a cautious note about the fourth quarter, saying the outlook remains uncertain… Samsung faces strong competition in the microprocessor sector, with Taiwan Semiconductor Manufacturing Co. winning orders for chips used in Apple’s iPhones. Samsung’s microprocessor business has been mired in losses, according to analysts’ estimates.”


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Film maker. Video game historian. Will put more in here this section soon!
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