Samsung profits drop as it faces the iPhone 6

The company is banking on new tech and services to attract customers to new smartphones

Samsung Electronics registered its sixth straight quarterly decline in profits in the first three months of this year as competition bit into its key smartphone and display businesses.

The company said net profit during the January to March quarter fell 39 per cent on the same period last year to 4.6 trillion won ($US4.3 billion). Revenue was 47 trillion won, down 12 per cent, in line with guidance issued earlier in April.

Samsung is under fierce pressure in the smartphone sector, where low-cost Chinese rivals are eroding sales at the low-end while Apple is winning customers at the high end.

The company doesn't disclose precise smartphone sales figures, but it said it sold 99 million phones of all types during the quarter. Of those, the share of smartphones was in the "mid 80s per cent," it said in a conference call with investors.

Revenue in its mobile division during the quarter was down by a fifth while operating profit in the division collapsed by 57 per cent year-on-year to 2.7 trillion won.

The runaway success of the iPhone 6 and iPhone 6 Plus, detailed when Apple reported its earnings on Monday, has made it even more important that Samsung scores a hit with the Galaxy S6, it's newest flagship handset that went on sale recently.

Apple is riding high on the success of the new phones, the first from the company to come close to matching the large screens found on Samsung's flagship handsets, and winning customers in China where demand easily outstripped supply.

Looking ahead, Samsung said it expects earnings to improve thanks to increased high-end sales as the Galaxy S6 rolls out worldwide although low- and mid-end smartphone sales are expected to be largely unchanged.

Sales are expected to remain around the same as the first quarter, although the average selling price of each phone is expected to jump a little from the $200 recorded during the first quarter.

Samsung said it plans to focus on new technologies, such a wireless charging, and new services, such as Samsung Pay, to drive demand for its phones.

Its device business, which is a major manufacturer of flat-panel displays and memory chips, saw sales rise 10 percent on the year and operating profit surge 81 percent thanks to strong demand for chips for servers and large-size TV panels.

Martyn Williams covers mobile telecoms, Silicon Valley and general technology breaking news for The IDG News Service. Follow Martyn on Twitter at @martyn_williams. Martyn's e-mail address is martyn_williams@idg.com

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Martyn Williams

IDG News Service
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