Monday, November 3, 2014

Apple Erasing Samsung’s mobile Profitability

After its years long legal battles over patent infringement, Apple has rapidly erased Samsung’s mobile division profitability, making it very much unprofitable since every other Android or Windows licensee has reduced its margins in the phone, tablet and PC market.

According to MacDailyNews, an iPhone having a larger screen option could hurt Samsung immeasurably more than myriad, unending traipses through the legal morass. According to Daniel Eran Dilger, he reports that while Apple’s critics have been giving the credits to Xiaomi for Samsung’s unprofitability, the South Korean giant’s plummeting profitability is not due to the drop in its low priced, high volume tablets and phones but an implosion of Samsung’s profitable, high end Galaxy S and Note models which directly have been competing with iPhones’.

Samsung had made an announcement of its 73.9% drop in its mobile division profits for the Q3 and analysts have been keeping tab through 2013 on the company’s increasing competitive pressure from Apple on the high end as well as from high volume sales of lower end models being increasingly produced by Chinese companies especially Xiaomi.

Tough Battle for Samsung

Samsung is going through a tough battle on both fronts though based on the numbers which the company has reported, the drop in profits that Samsung has suffered in the Q3 has been the outcome of the thermonuclear assault by Apple focusing on its core revenue and profit generators.

Moreover Apple’s damage to Samsung will tend to get worse for the company as it remains are ravaged by the other Android licensees. Though Samsung’s profit has collapsed, IDC has reported in its smartphone market estimates that Samsung continues to lead the world in shipments as well as market share by a huge margin by shipping 78.1 million units, a YoY decline of around 8.2 percent.

Samsung had also reported that there was a slight growth in shipment in its earnings release though the earnings declined QoQ since ASP decreased due to weak smartphones product mix with the sales decrease adding pressure on the cost structure.

Samsung Yet to Pay Apple for Patent Infringement

The profits reduced due to average selling prices going down since it was selling less profitable phones and it was getting expensive to build its most expensive phones due to reduction in economies of scales.

Samsung stated that in the quarter, its phone shipments were driven by mid to low end products. As a result Samsung missed out on high end sales and while it was estimated that its total sales went down by 8.2 percent, analyst Ben Benjarin reported that its premium phones went down by almost fifty percent in the third quarter.

It is said that Samsung has still not paid Apple the almost $1 billion judgement which they were ordered to pay back in the year 2012 for patent infringement though it was reported of a much larger $4.7 billion YoY drop in quarterly profits within its IT & Mobile Communication group which is a rough comparison to Apple’s operation and the outcome of this decline in profits is not a mystery.

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