Samsung Electronics Co.'s fourth-quarter operating profit declined 6% over a year earlier, the company said on Tuesday, underlining the challenges the world's largest smartphone maker faces as sales of mobile devices slow in advanced countries.
The South Korean company said in a Tuesday earnings preview that its operating profit is estimated at 8.3 trillion won ($7.8 billion) for the final three months of 2013. The result was lower than analysts' forecast and also an 18% drop from the third quarter.
Sales rose 5% to 59 trillion won ($55.4 billion) for the October-December period.
Analysts said Samsung's profits fell because its businesses supplying advanced displays and chips for iPhones and Galaxy smartphones posted smaller profits with slowing demand for high-end smartphones. They said Samsung's smartphone business making Galaxy smartphones and Galaxy Gear smartwatches was not as lucrative as before because of higher marketing costs.
"It's an earnings shock," said analyst James Song at KDB Daewoo Securities Co. "The profit at mobile communications business must have been much lower than expected, although it's likely that Samsung gave bigger bonuses to employees." Song had estimated 9.3 trillion won of operating profit for Samsung.
Samsung Electronics' smartphone business also faces more competition in China. Starting next week, Apple Inc. is scheduled to begin selling iPhones through China Mobile Ltd., the world's largest wireless carrier, a move that could threaten Samsung's growth in the smartphone market there. Samsung held 21% market share in China's smartphone market, up from 14% a year earlier, while Apple's share declined to 6% from 8%, according to research firm Canalys.
Samsung, which did not elaborate on its earnings preview, will disclose details of its earnings including net profit later this month.