Samsung Q2 earnings: a disappointing quarter, but new high-end phones are on the way

Samsung warned its investors that a disappointing quarter was coming, but that probably doesn’t make Thursday’s second quarter earnings report any easier to hear: the Korean company reported its first year-over-year drop in profit since 2012. Mind you, it still made a huge profit — 7.2 trillion won, or about $7.1 billion — but that figure represents a 24 percent drop from the same quarter last year.
As hinted in Samsung’s earnings preview, lagging sales of smartphones and tablets hurt its mobile division, and that in turn affected the display and semiconductor divisions which supply components for Samsung’s handsets. The strong Korean won, which is at a 6-year high against the dollar, certainly didn’t help the company’s overall bottom line.
According to remarks during a conference call made by mobile SVP Kim Hyun-joon, Samsung has a second global smartphone launch planned before 2014 is over. No, he wasn’t talking about the Galaxy Note 4, which is expected to come out this fall. Samsung’s new high-end phone is going to be something different, which features “new materials.”
It’s not clear whether a new expensive phone is the appropriate panacea for Samsung. After all, the Galaxy S5 came out this past quarter. Samsung’s real problem is that it is struggling to compete in China and other similar markets against cheaper Android phones made by companies like Huawei and Xiaomi. According to Hyun-joon, Samsung is already tinkering with its pipeline to make more China-friendly devices. Expect big screens and low-to-mid end prices.