Samsung Profit Growth Slows Sharply

In the age of "dog year", nothing is surprising, and nobody can expect perceptual growth.

But strangely, the "investors" (a.k.a gamblers) all expect constant growth. Whenever such kind of "slow down" news comes, the stock price will respond sensitively.

People seldom think about long time growth, potential of a company, just look at short term movement and the chips at hand. Typical gambler movements.

For such reasons, the medias are always excited each time such kind of figure comes out. Especially big changes make bigger news title, just like any kind of violent crimes, tragic accidents, catastrophic disasters etc. being sold out like hot cakes.

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SEOUL— Samsung Electronics Co. 005930.SE +0.62%  forecast a weak first half after releasing fourth-quarter earnings that showed growth slowed sharply.

Samsung, the world's biggest smartphone maker by shipments, saw growth at its mobile unit, which accounts for more than half of the company's profit, flattening and said fluctuations in the local currency hurt its earnings by 700 billion won ($651 million). It also incurred an 800 billion won one-time charge related to employee bonuses.

Fourth-quarter net profit rose 3.7% from a year earlier but slowed significantly from third quarter's 25.6%, as healthy margins from the company's chip unit weren't enough to offset cooling profit momentum for Samsung's high-end Galaxy series of smartphones.

"Amid macroeconomic uncertainties such as a strong Korean won and increased concerns over possible quantitative easing tapering in the U.S., our earnings were lower than what the market expected," Robert Yi, head of Samsung's investor relations, said in a statement Friday.

Samsung said net profit for the three months ended Dec. 31 rose to 7.3 trillion won from 7.04 trillion won a year earlier. But it was down sharply from the 8.24 trillion won posted in the third quarter, which was the company's seventh straight record-high quarterly figure in a row. Sales rose 5.7% from a year earlier to 59.3 trillion won.

Operating profit fell 6% from a year earlier to 8.31 trillion won, the first decline in two years.

The drop reflects slowing momentum at the company's telecoms unit, where profit growth has gradually fallen.

Cellphones and telecom equipment represented 66% of the company's fourth-quarter operating profit. While the mobile business has accounted for more than half of Samsung's profits in the last two years, margins came under pressure in 2013 as the company sold more lower-margin smartphones and spent heavily on marketing. The operating profit margin for the business fell to 16% from 17.8% a year earlier.

Analysts estimate Samsung sold between 85 million to 87 million smartphones during the quarter, including the company's flagship Galaxy S4 smartphone.

Investors are concerned about the company's falling stock price and a lack of clarity over future growth as average selling prices of smartphones fall further.

In China, Samsung will have to walk a fine line between positioning itself as a smartphone vendor of both high-end and low-end phones following Apple Inc. AAPL +0.85%  's recent deal with China Mobile Ltd. 0941.HK -0.78%  to sell iPhones there, while competition from homegrown low-cost phone makers increases.

Samsung said it would spend a similar amount on capital expenditure this year after spending 23.8 trillion won in 2013.

Another challenge is a new round of patent litigation with Apple, slated to go on trial in March, involving a more recent array of Samsung products such as the Galaxy S III smartphone. Analysts expect bigger provisions to cover for future costs and damages.
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