Samsung Electronics struggles to find fix for smartphone woes

Tue Oct 6, 2015 2:06am EDT
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By Se Young Lee

SEOUL (Reuters) - More than a year into the overhaul of its smartphone lineup, Samsung Electronics Co Ltd (005930.KS: Quote) has yet to find a way to reverse a slide in market share or margins, clouding its growth outlook and fuelling investor impatience.

The world's largest handset maker is forecast on Wednesday to guide for its first annual increase in quarterly profit in two years following a dismal third quarter in 2014, but profits and mobile margins are expected to contract on a sequential basis.

Samsung has tried various fixes for its phone business. At the lower end it launched new products targeting markets such as India, while at the high end it switched from plastic to metal, introduced curved screens and cut the price for its flagship Galaxy S6 devices after sales fell short of high expectations in the second quarter.

While those measures have lifted Samsung from its earnings trough, they have not been enough to regain market share from Apple Inc (AAPL.O: Quote) at the high end and Chinese markers at the lower end, or convince investors that the company is back on track for sustained growth. 

"Samsung is at a standstill," said Kim Hyun-su, fund manager for IBK Asset Management. "It's having trouble finding a way to create new demand for its smartphones."

The South Korean electronics giant's stock trades at a forward price-to-book ratio of 0.9 - the lowest since 2002, according to Thomson Reuters data. It is under pressure again to return some of a cash pile of 61.8 trillion won ($53 billion) as of end-June through dividends or share buybacks.

MOBILE WOES   Continued...

A man walks at the Samsung Electronics' headquarters in Seoul January 7, 2015. REUTERS/Kim Hong-Ji