Samsung today released its earnings guidance for the third quarter of the year. It expects operating profit for the quarter to fall 56 percent compared to the same period last year. While that may seem like bad news, it's actually an indication that the strategy Samsung has been on for the past few quarters is working.
The company's profit was down 56 percent in the previous quarter compared to Q2 2018. That was due to weak demand for memory chips which accounted for much of Samsung's record-breaking profits in the previous year.
Samsung's Q3 2019 56% profit decline is an indication
The last couple of quarters have been challenging for the company as demand for semiconductor chips didn't pick up. It did say in the previous quarter the demand would increase in the second half of the year as data center customers have started buying memory chips again.
Samsung also executed a new strategy in the mobile market by launching a revamped Galaxy A series and the low-end Galaxy M series. These new handsets have done very well in the market against the Chinese competition and have contributed to increasing its revenues. The Galaxy Note 10 is also going to help the mobile division's fortunes in the second half of this year.
Analysts were expecting Samsung's Q3 2019 profit to fall by 60 percent compared to Q3 2018. Samsung's own guidance suggests that it will post revenues of 62 trillion won or $52 billion for the quarter, up 5.3 percent from last year. It expects to post an operating profit of 7.7 trillion won or $6.4 billion, a 56.2 percent drop from last year.
Unless there's a significant spike in demand and prices for semiconductor products, Samsung likely won't be making the same kind of profits as it did in the previous financial year. However, its performance in the July-September quarter has exceeded the market's expectations. Samsung is aware that it's facing a challenging business environment and the company is far from resting on its laurels.
The full earnings results for Q3 2019 will be released later this month.
