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Samsung Confirms Rough Conditions for Smartphones and Tablets


The South Korean tech giant's earnings report is not instilling confidence.


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South Korean electronics giant Samsung (OTCMKTS:SSNLF) recently reported first-quarter earnings. Given the company's importance in the global tech market as both a component supplier and smartphone/tablet maker, its results are always worth watching.

Let's take a look at the highlights.

Revenue was KRW 53.7 trillion, while operating income was KRW 8.5 trillion, numbers that are slightly above the guidance (subscription required) issued in early April. Samsung's gross margin fell slightly to 40.3% from 40.6% last year, while its operating margin fell to 15.8% from 16.6%.

Mobile revenue was down 2.5%, and here's where things start looking not so pretty.

In developed markets, Samsung said handset channel inventory was up on "intensified competition." And in emerging markets, including China, "demand decreased."

Looking forward in smartphones, the high end will be fueled by early upgrade programs in North America and LTE (long-term evolution) expansion in China, but the low end is facing competitive pressure.

And in tablets, Samsung expects to see heavier competition in what it calls a "slowdown of growth trend." That makes a lot of sense, as we saw a major industry slowdown in Q4, while high-quality, low-priced tablets from the likes of Google (NASDAQ:GOOG) and (NASDAQ:AMZN) have completely flooded the market. And, of course, we can't forget that Apple (NASDAQ:AAPL) just reported March quarter iPad shipments that were well below expectations.

On the plus side, the company is expecting good things in its memory business, and it's seeing traction in the UHD TV market. Overall, however, Samsung's results support the idea that the mobile device industry is in a post-boom slowdown.

Twitter: @MichaelComeau

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