Samsung’s financial world was shaken last year with consecutive quarters of low smartphone sales, which resulted in lower revenues and lower profits. Not that Samsung is going anywhere – smartphones is but one division of Samsung – their appliances, HDTVs, chip foundries, displays and memory sales are all very solid and growing. But Samsung prides themselves on being number one and they lost that title in China, to Xiaomi and in the US to Apple. They desperately needed their new Galaxy S6 and S6 Edge to be a big hit after the Galaxy S5 failed to make a positive impact on sales or profits.
Investors all turn to the financial analysts for answers when it comes to Samsung’s financial outlook for 2015 – there are groups that range from slower declines to great optimism – the latest analytical look from Kyobo Securities, report the Samsung will have a stronger-than-expected performance in chips and smartphones. Kyobo analyst Choi Do-yeon said in a report, “Its operating profit is likely to grow 8 percent quarter-on-quarter on increased shipments of Galaxy S6 smartphones and the continued stronger demand for memory chips. A steady cut in profit losses in its logic chip division is another positive factor.”
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Much of this optimism is based on the new Galaxy S6 and Galaxy S Edge and their major design overhaul, as it turned out to be exactly what the analysts were hoping for, insisting that it does not have to be a mega success. If it simply slows down Samsung’s market share loss, it would be a success in the eyes of the investors and analysts. It helps that Samsung uses their own displays, chips and memory in their smartphones, saving them some money on each device manufactured. This may be another reason Samsung decided to step away from Qualcomm and use their own in-house Exynos chip as its main processor – it also allows Samsung the ability to better optimize the hardware and software.
Mark Newman at Bernstein Research said, “We believe the unveiled phone is sufficient to deliver and has the potential to beat that modest expectation. Furthermore, we think the components side of the S6 is more positive for Samsung’s earnings direction with the processor moving internal (saving potentially $28 per phone), significantly more memory (DRAM and particularly NAND) and the display showing off their technology lead in flexible OLED.”
With Samsung offering the new Galaxy S6 in 32GB/64GB/128GB models like Apple does with its iPhone, Samsung’s NAND flash business will also benefit from the change. Han Seung-hoon at Deutsche Bank said he expects 60-percent of the Galaxy S6’s will be the 32GB model, followed by 30-percent of the 64GB variant and 10-percent for the 128GB model. It may be that this was Samsung’s plans all along – build a better mousetrap, but use more of its own parts to increase its profits.