Weak smartphone and tablet sales will dampen Samsung’s second-quarter earnings

Samsung issued second-quarter earnings estimates on Tuesday, which included an unusual amount of commentary and guidance for the Seoul giant. The bad news? Second quarter profit is expected to drop 24 percent from the same quarter last year, down to 7.2 trillion won ($7.1 billion) on revenue of about 52 trillion won.
Samsung blamed its unusually weak quarter on the strong Korean won — which is at a 6-year high against the dollar — and declining smartphone and tablet shipments. Unfortunately for Samsung, declining smartphone sales and piling inventory also affected its display and semiconductor divisions.
In the past few years, Samsung has been reporting quarterly profits north of 8 trillion won, largely driven by its smartphone business. While Samsung’s expensive models, such as the Galaxy S5, might still be selling well, it is facing challenges at the low end of the market, especially in China, as cheap Chinese smartphones become more common. Samsung is also seeing weak overall demand for its line of tablets, noting that “the demand for 5-to-6 inch smartphones cannibalized the demand for 7-to-8 inch tablets.”
South Korean companies do not give guidance estimates in terms of ranges, so the revenue and profit numbers provided are the median value that Samsung expects. The numbers Samsung reported are not audited and are not from the full earnings release, which will be announced later this month.