Samsung misses profit estimates as new Galaxy phones fail to revive growth

Customers try out a Galaxy S6 Edge smartphone on display at the Samsung's flagship store in Seoul, South Korea.
Customers try out a Galaxy S6 Edge smartphone on display at the Samsung's flagship store in Seoul, South Korea.PHOTO: BLOOMBERG

SEOUL (BLOOMBERG) - Samsung Electronics posted third-quarter profit that missed analysts' estimates as price cuts on new Galaxy S6 smartphones failed to sway consumers from buying iPhones.

Net income, excluding minority interests, was 5.31 trillion won (S$6.59 billion) in the three months ended September, the company said on Thursday (Oct 29). That compares with the 5.4 trillion-won average of 29 estimates compiled by Bloomberg.

Increased marketing spending, including a US$120 (S$168) rebate programme, has not sparked sales of the premium devices that generate fatter profit margins. Samsung is trying to revive demand for Galaxy smartphones through a new mobile payment service and by releasing larger devices at least a month before the new iPhones to recapture market share from Apple.

"Samsung's lower-end smartphones under US$150 sold well, but it didn't help lift the margins at all," Mr Lee Seung Woo, an analyst at IBK Securities in Seoul, said before the earnings release. "Aggressive marketing in the US can help Samsung expand its Galaxy share of the high-end space, but it's giving up a substantial profit margin for it."

Sales were 51.7 trillion won in the quarter, compared with estimates for 50.7 trillion won.

Shares of Samsung rose 0.8 per cent to 1,308,000 won in Seoul on Wednesday. The stock has dropped 1.4 per cent this year, compared with a 6.6 per cent gain in the benchmark Kospi index.