Samsung Earnings Under Pressure

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SEOUL, Jan 8 – Samsung Electronics Co estimated today that its fourth-quarter operating income dropped 37%. In its earnings preview, Samsung put its October-December operating profit at 5.2 trillion won (RM16.86 billion), which was still higher than analysts’ consensus of 4.9 trillion won according to FactSet, a financial data provider.

The preliminary result will still send the full year’s profit for 2014 to its lowest level since 2011 as profits from smartphone areas remain weak. Sales dropped 12% to 52 trillion won, in line with analysts’ consensus. Samsung releases its full financial results later this month.

Analysts said Samsung’s smartphone business, which contributed two-thirds of its profit in the last two years, continued to struggle but improvements in its semiconductor division helped the company rebound from the third quarter, its worst quarter in nearly three years.

The semiconductor division, which develops memory chips, mobile processors and solid state drives, will generate more profit than Samsung’s Galaxy phone sales this year, according to analysts. Despite efforts to adopt new designs for its phones and introduce novel factors such as a curved side display in its mobile devices, Samsung’s smartphone business will continue to struggle, they said.

Samsung is pushing hard to find new revenue sources in Internet-connected televisions and smart home to take bigger share in the emerging industry known as the Internet of Things. BK Yoon, Samsung president of consumer electronics, said earlier this week that by 2017 all Samsung televisions will be Internet connected.

He also said in five years all Samsung hardware products will be ready for the Internet of Things. The company is taking its software — designed to challenge Google’s Android operating system — to television sets. Samsung said its all-new Internet-connected televisions this year will run on Tizen, its home-made operating system.

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