Maria Montero

Samsung’s next first quarter earnings will be ugly

It’s that time folks, Samsung has reported on the guidance for its upcoming Q1 quarter, and things aren’t looking good.

Samsung is forecasting that revenue for the quarter will reach KRW 51-53 trillion ($ 44.87- $ 46.63 billion), which would represent a drop of around 15 percent from the previous year. The Korean tech giant reported a record operating profit in the first quarter of 2018: $ 13.76 billion, but this time it is forecast to fall by a whopping 60 percent for the current business quarter. According to Bloomberg, that would be the company’s worst downturn in four years.

Following a record year will never be easy, but the forecasted Q1 2019 operating profit of KRW 6.1 to 6.3 billion (about $ 5.5 billion) represents a rather steep 43 percent drop from the previous quarter. That will give Samsung shareholders a lot to worry about.

The company’s pre-earnings guidance doesn’t go into detail on the predictions, but last year’s record earnings were largely due to the success of its consumer device business and also a strong market for memory chips. . There have been many warning signs that those good times may not last.

Samsung itself downplayed the impressive first quarter 2018 results – multiple warnings ahead. My colleague Brian Heater pointed out that the words “growth slowdown” appeared seven times in Samsung’s ad at the time, due to concerns surrounding the company’s display panel business and a slowdown. Growth within the general smartphone industry.

As we well know, analyst reports show that people are buying fewer phones for a variety of reasons. That’s one explanation for Apple’s multi-device approach pushing its high-end model to well beyond $ 1,000. Slower growth means the need to get more revenue from the most loyal users, thereby increasing the average selling price (ASP).

Samsung has long played at the intermediate levels, where it faces stiff competition from the likes of Xiaomi, Oppo, Huawei and others from China, but it will be interesting to see if it changes its high-end approach.

We’ll know more when the company releases its full first-quarter earnings report later this month, so stay tuned.