Samsung analysts ask hard questions as S4 marketing charm wears off

Sun Jun 16, 2013 5:06pm EDT
 
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By Miyoung Kim

SEOUL (Reuters) - Analysts fell under Samsung Electronics Co Ltd's marketing spell when they made what they now admit were hopelessly optimistic forecasts for its smartphone sales.

Samsung's huge share of the high-end smartphone market also persuaded some analysts to downplay industry data pointing to a fast-saturating segment, a reality that is already eating into sales of Apple Inc's iPhone 5.

Woori Investment & Securities, one of South Korea's largest securities firms, cut its outlook for Samsung's earnings and target share price on June 5. It was the first to adjust its view.

A massive wave of downgrades has since followed, with forecasters including JPMorgan, Morgan Stanley and Goldman Sachs taking a harder look at their assumptions of how well the S4, Samsung's latest Galaxy smartphone, would actually do.

Sales estimates for the S4 were slashed by as much as 30 percent, stirring investor concerns over Samsung's mobile devices division - the company's biggest profit generator.

Investors in the South Korean IT giant have paid dearly. Samsung lost nearly $20 billion in market value in a week as shares plunged following the downgrades.

"I'd say most forecasters including myself had this conviction that they'll outperform again - because it's Samsung," said Byun Hanjoon, an analyst at KB Investment & Securities. "They had beaten expectations before, which led many to believe they are bound to excel again with the S4."

The S4 sold 10 million sets in just one month of its debut in late April, outperforming its predecessor, the S3.   Continued...

 
A man takes a photograph of a logo of Samsung Electronics Co Ltd's latest flagship smartphone S4 during its launch event at the company's headquarters in Seoul April 25, 2013. REUTERS/Kim Hong-Ji