Samsung Q2 profits missed forecasts

samsungSamsung Electronics missed already adjusted forecasts for earnings in the second quarter on growing concerns that the company may have reached its peak and will struggle to meet bullish expectations.

The flagship Galaxy S smartphone is loosing market share as several competitors appeared, after it pushed Samsung to market leadership beating iPhone 5 year hegemony. Now investors fear Samsung may follow struggling Apple with shrinking margins, in an industry where one model device could make a difference of whether company lives or dies.

“Is Samsungs smartphone story now over? Not quite yet. Its growth is indeed slowing due largely to disappointing sales of the S4,” said for Reuters Jung Sang-jin, a fund manager at Dongbu Asset Management, which owns Samsung shares.

The disappointing earnings estimate by Samsung, reflected its share price which declined more than 3% on Friday. They have dropped 17% since early June, hit by a series of brokerage downgrades. The share price reflects concerns about Samsungs handset margins, as the business is generating 70% of the tech giants total profit.

JPMorgan and Morgan Stanley analysts reduced forcasts for 2013 sales of the Galaxy S4 by 6% and 3% respectively, triggering the sharpest fall in Samsung’s share price for more than a year. The downgrades were supported by Samsung itself as the company stated that unrealistically high expectations are to blame for following disappointment.

“The furious growth spurt seen in the global smartphone market last year is expected to be pacified by intensifying price competition compounded by a slew of new products,” Samsung said in January.

The guidance, released ahead of full quarterly results due on July 26, was worse than an average forecast of 10.16 trillion won in a poll of 43 analysts by Thomson Reuters.

As competition intensifies especially in the low-end segment, it is interesting to see how Samsung responds. The company already stated it is preparing stripped versions of the higher priced models to satisfy demand of cheaper less powerful smartphones.

Wearable technology will also be crucial to the company as it tries to stay competitive with the newest trends. According to analysts wearable devices would not play a main role in profits but would be more of a complement to the smartphone business. Company has already filed a trademark for “Samsung Gear” in the US – brand name especially for wearables.

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