Samsung predicts disappointing Q1 profits

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Samsung Electronics, the world's largest smartphone maker, said it expects a drop in operating profit during the first quarter of 2014.

It predicted that consolidated operating profit would come to $7.9 billion, down 4.3 percent from $8.4 billion year-on-year. Consolidated sales would be some $51 billion, up slightly from $50.9 billion in the first quarter of 2013.

Both figures are median values for ranges it provided. Samsung noted that South Korean regulations do not allow earnings guidance to be stated in a range. It did not provide any figures for its smartphone business. 

Analysts said Samsung is effectively in a holding pattern as it tries to maintain its leadership position in multiple consumer electronics categories while simultaneously attempting to develop the next big thing like smart watches or smart glasses that will reignite profit growth.

Other analysts said Samsung has to increase its focus on less expensive smartphones to help its bottom line. They noted that profit margins on the premium phones are very good but Samsung is not paying attention to the mid- and low-tier range. 

They noted that the mid- and low-tier range comprise the majority of volume so if Samsung wants to increase its profitability, it needs to find a way to make the mid-low tier profitable.

Samsung's new estimates follow flat profits in the company's smartphone and tablet business in the last quarter of 2013. It reported a $5.3 billion profit, unchanged from a year earlier and revenues of $30.8 billion up 8.7 percent on-year, Samsung's mobile business suffered due to seasonally increased marketing expenditures and an unspecified one-off expense.

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