Samsung Foresees a Decline in Profit

Samsung Foresees a Decline in Profit

The next big thing is here, as Samsung Electronics likes to say in its ads. But fewer people appear to be buying it.

Samsung, which is based in South Korea, on Tuesday published a financial earnings preview that forecast a profit of about 7.2 trillion won, or $7.1 billion, for the three months that ended in June.

While that is still a substantial chunk of money, the overall profit represents a decline of 24 percent from the same period a year ago. The profit forecast also missed analysts’ expectations of about 8 trillion won.

Samsung, in a rare move, issued a lengthy statement explaining the disappointing forecast. It blamed a slowdown in growth of the overall smartphone market as well as increased competition in China and in some European markets.

The company noted that smartphone sales were typically soft in the second quarter in China, the largest smartphone market in the world. But it also said its tablet sales were “sluggish” because people typically upgraded tablets more slowly than they did smartphones. It said that higher shipments of big-screen smartphones cannibalized demand for smaller tablets.

Samsung also attributed the disappointing profit to the Korean currency’s appreciation against the dollar, euro and other emerging-market currencies.

In order to bolster sales of smartphones over the quarter, Samsung said, it had to increase spending on marketing promotions, which also ate into its profit. For example, in one promotion offered by Verizon Wireless, consumers could buy a Galaxy S5 smartphone and get another phone free.

These issues are not unique to Samsung. Growth of the overall smartphone market has slowed over the last year, largely because many people who want a smartphone already have one. Smartphones with nice screens and high-quality cameras are commonplace, and people may be feeling less compelled to upgrade as frequently, analysts say.

But Samsung, which offers a range of phones at various prices, is feeling pressure from all sides of the market. In the high end, it faces stiff competition from Apple, whose iPhone sales have recently accelerated thanks to a new partnership with China Mobile, the largest phone carrier in the world.

And in the low end and midtier phone markets, Samsung is facing intense competition from emerging Asian phone makers like Lenovo, ZTE, Xiaomi and Huawei.

A version of this article appears in print on July 8, 2014, on page B3 of the New York edition with the headline: Samsung Foresees a Decline in Profit.


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