Samsung achieves Galactic profits, but warns of 2013 slowdown

The consumer electronics titan has announced record quarterly profits thanks to sales of its Galaxy smartphone, but reckons intensified competition will dampen growth in 2013.

by Michael Northcott
Last Updated: 19 Aug 2013

Over the last year, Samsung has been stealing a march on its competitors, overtaking Apple and the smaller players at breakneck speed, and shifting hundreds of millions of pounds worth of smartphone joy to consumers. It has just reported Q4 profits for 2012 up 76% to £4.2bn compared with the same period the previous year. Results to phone home about, you might say.

Demand for cheap tablets and smartphones has also boosted consumer electronics performance on the high street: the Carphone Warehouse today reported a 16% rise in revenues for the Q4 period. And it's no surprise really: Samsung alone shifted 63 million smartphones during the period, outstripping Apple by a margin of more than 15 million units.

But by Samsung's own admission, its Galaxy juggernaut – which produced half of those profits – could be on the verge of derailing. In its earnings statement, released on Friday, it said: ‘The furious growth spurt seen in the global smartphone market last year is expected to be pacified by intensifying price competition, compounded by a slew of new products.’ 

The firm also reckons that in the first quarter of 2013, demand for smartphones in the developed world will taper off - could this be a point of market saturation? – and future growth will come from cheaper handsets and tablet PCs in the developing world. 

Also, significantly for long-time investors in the company, Samsung broke from its habit of providing a target figure for capital expenditure in the financial year, saying it would react to the market’s ‘ebb and flow’ with a plan that is ‘flexible in manner’.

Nonetheless, the Q4 earnings are a blow for competitor Apple, whose iPhone 5 sold 47.8 million units, a few million shy of its 50 million target over the final quarter and Christmas period. Looks like Samsung is taking more than a bite out of Apple’s market share.

If Samsung’s prediction is right, this is a tipping point that everyone should have expected. People do not need five iPhones or Galaxies, so the endless flogging of £500 handsets was bound to tail off eventually. 

Now to crack China and India…

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