Samsung's huge profits aren't good enough for investors

Samsung is selling huge numbers of smartphones and its profits are up 47 percent. Not good enough, say investors.

Samsung stock was down 4 percent in South Korea this morning. The company is selling huge numbers of smartphones and its profits are up 47 percent. Not good enough, say investors.

Operating profit at Samsung soared to$8.3 billion in the second quarter. The previous quarter, it sold 30 million more smartphones than Apple. And now the but: Samsung’s new, hyped Galaxy S4 smartphone didn’t sell the way many expected.

Michael Levin, with Consumer Intelligence Research Partners, describes analyst expectations this way:

“Given that there’s been essentially radio silence from Apple over the past several quarters on product launch,” Levin says, “maybe Samsung could sort of charge into the void.”

In fact, both Samsung and Apple are falling from the same tree, as far as stock prices. Apple is down 21 percent this year, Samsung is minus 17. The big challenge for both is that the rich country market is already mature, most of us now own a smartphone.

“We’re seeing a shift in the smartphone market from the high end to the low end,” says Neil Mawston at Strategy Analytics. “And the industry now is selling more volumes but at lower price points.”

Which means skinnier profits, per phone.

About the author

Scott Tong is a correspondent for Marketplace’s sustainability desk, with a focus on energy, environment, resources, climate, supply chain and the global economy.

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