Samsung forecasts a 37% drop in quarterly profits

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Models showing Samsung Galaxy phonesImage source, AFP
Image caption,
Samsung has been struggling of late against cheaper electronics manufacturers, especially in China

Samsung Electronics has forecast a 37.4% fall in quarterly operating profit from a year earlier.

In its pre-earnings guidance, the firm forecast an operating profit of 5.2tn Korean won ($4.74bn; £3.14bn) for the three months to December.

Analysts had expected an operating profit guidance of about 5tn won.

Shares in the firm, which is the world's largest TV and mobile manufacturer, were up in early morning trade in South Korea on the news.

The firm's final fourth-quarter earnings are expected later this month.

Samsung has been struggling of late against cheaper electronics manufactures, especially in China, which is the world's largest smartphone market.

In particular, its flagship Galaxy smartphone line has been losing market share to cheaper models.

The firm said its quarterly sales would probably come to approximately 52tn won, up from 47tn won in the earlier quarter and in line with most expectations.

Future outlook?

Analysts agree competition in the smartphone market, particularly in Asia, has become more intense than ever.

Chinese handset maker Xiaomi, with which Samsung competes on the domestic front in China, said on Monday it had more than doubled its revenue in 2014, just a week after it was named the world's most valuable tech start-up.

Image source, Getty Images
Image caption,
Xiaomi says its revenue jumped 135% last year

"Xiaomi has proven to be very, very successful and is number one in China already," Frost & Sullivan's Andrew Milroy told the BBC.

"More than that, the firm has come from nothing in the last couple of years, so Samsung has to start being more competitive."

Mr Milroy said the South Korean electronics giant had to focus on innovation in order to get ahead.

"It's not come out with anything spectacularly innovative recently," he said.

"Its new models are basically an improvement of existing products, but they pride themselves on being innovative, so they really have to start focusing on that to stay in the game."

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