Samsung Electronics' Q3 profit falls 60% on sluggish mobile business

SEOUL - Samsung Electronics, the world's largest maker of smartphones, memory chips and flat screens, said Thursday that its third-quarter operating profit fell 60 percent from a year earlier on sluggish mobile phone business amid fiercer competition.

Operating profit reached 4.06 trillion won ($3.85 billion) in the third quarter, down 60.05 percent from a year earlier, the company said in a statement. From three months ago, the profit sank 43.5 percent.

Samsung earnings decline 60% in worst quarterly performance

Samsung's Q3 operating profit drops 60%

It was the first time in about three years that Samsung's operating profit broke below the 5 trillion-won level. The final figure was lower than the preliminary reading of 4.1 trillion won unveiled by the company earlier this month.

Revenue declined 19.69 percent from a year earlier to 47.45 trillion won in the third quarter, falling below the 50 trillion- won level for the first time in about two years.

Net income retreated 48.79 percent to 4.22 trillion won in the cited period, and operating margin was 8.6 percent in the third quarter, sliding to the single-digit number for the first time in around three years.

The negative results stemmed mainly from weak performance in the mobile phone division, which led Samsung's earnings in the past three years.

The IT mobile unit, which makes smartphones, posted an operating profit of 1.75 trillion won in the third quarter, falling below the 2 trillion-won level for the first time since the second quarter of 2011.

The mobile business profit continued to fall this year from 6.43 trillion won in the first quarter to 4.42 trillion won in the second quarter.

Despite the marginal increase in the third-quarter smartphone sales, smartphone earnings decreased on the back of a fall in the average selling price (ASP) of smartphones amid growing share of middle- to low-end smartphone sales, the company said. Prices of existing smartphone models also declined during the quarter.

Samsung's global mobile phone sales, including smartphones, totaled 102 million units in the third quarter, up 7.4 percent from three months earlier. Smartphone sales made up almost 80 percent of the total. The ASP of mobile phones averaged $190  during the quarter.

Samsung failed to tackle the downward trend of smarpthone prices amid fiercer competition with Chinese rivals such as Huawei, which has provided middle- to low-end products.

The global ASP of smartphones kept falling from about $330 in 2011 to some 270 dollars in 2013. It declined to about 240 dollars in the second quarter of this year.

The DS segment, which makes semiconductors and display panels, logged an operating profit of 2.33 trillion won in the third quarter, up from a 2.09 trillion-won profit in the second quarter.

The CE division, which produces consumer electronics, posted an operating profit of 50 billion won in the quarter, down from a 770 billion-won profit in the prior quarter.

The setback in the CE profitability was due in part to a decrease in TV ASP, which was compounded by stronger panel price and weak demand for large screen TVs, the company said.