Sunday, July 7, 2013

Why Did SamSung's Profit Oulook Miss Estimates?


I heard lately that even Samsung is not doing as superb as it should be. Although it is devouring market shares with its huge selection of phones, tablets, [phablets], TVs, computers, etc...; smashing competition with an appealing operating system (Android) -as I like to call it: a personable/fashionable/customizable OS; earnings don't seem to hit over the roof.
According to an article on BBC:
Samsung shares fell 3.8% after the profit guidance. Its shares have dropped more than
15% since early June, after a various brokerages downgraded their outlook for the firm. "The slowdown in its handset business appears to be worse than expected and the disappointing result simply reinforces the market view that Samsung's smartphone growth momentum is slowing," said Lee Sei-chul, an analyst at Seoul-based Meritz Securities....
....One of the biggest risks for Samsung Electronics going forward is that 70% of total operating profit comes from mobile business," said Jeff Kim of Hyundai Securities.
Why might that be? What's going on? Aren't they making Apple cry these days? Aren't they the hero wearing the Android jumpsuit? Isn't Samsung holding high the affordable-high end-device flag despite vast seas of competitors? What's going on?
The answer is simple and complex at the same time.
Way Too Many Products in Their Portfolio (simple)  
But Wait, Don't Consumers Like That? (complex)
That's right, we like that. However, the main issue here is
the high "rate" of new products hitting the shelves with less real innovation. Having many models of phones, tablets, computers is welcome. Everyone can have what he or she wants. some people prefer large models (i.e. Galaxy s3, s4, Galaxy Tab), while other folks prefer smaller size with similar contents (Mini S3, Mini S4, Tab 7").
But having these coming out every single year with few -but great- additions is not appealing to the masses.
As proof to this, I am stiff using my old great Samsung Galaxy S2, A.K.A GT-9100.
The phone still looks new. My screen is flawless because I have been using soft covers and screen protectors since mid 2011.
Galaxy S4, S3 and S         Source:
At first sight the S4 and the S3 look bigger and perhaps cooler. The latter is truly relative.
The point I want to stress in this post is that the average individual doesn't use all the new (few) features that come in every year. I consider myself an above average user of digital devices. Tech is a hobby of mine.
The slowdown in the handset business is because there is plethora of phones that offer the same features and they come in every year with the same new things (size, camera pixel, etc...).  Many people are still buying the Iphone 4. Why would one get an Iphone 4S or Iphone 5 if the latter is sufficient for you to check your emails, watch some videos, post and argue on Facebook, download and play your apps.

My advice to phone makers (Apple, Samsung, LG, Motorola, etc...) is they should give people the time to get used to what they have. Use this time gap to truly innovate something. We don't want any S, Mini, Mega, Ultra, Jumbo stuff every single year. We will buy your products [to the point there will be a surplus of demand] if you truly innovate from a Nokia 3310 (being the actual 2013 smartphones) to a Galaxy S5/Iphone 6 (something truly innovative).
You are the cause of this slowdown in the handsets markets.  (simple)

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