The operating profit drop for Q3 2014 is estimated at 60%

Oct 7, 2014 09:23 GMT  ·  By

Profit is the lifeblood of every company out there, so it's always an unpleasant thing when it falls, or when a company incurs losses. Samsung isn't in danger of going in the red, but its profits aren't doing so hot either.

In fact, not only has Samsung's profit stopped rising, it has fallen by over half. The company has been experiencing a rise in profits since 2011, but its finances for 2014 are expected to show a loss, or at least a profit decrease.

The assumption was made based on the preliminary financial results for the third quarter of the ongoing year. The profit is expected to be 59.7% smaller than for Q2.

That means that Samsung will end the July-September period of 2014 with $3.8 billion / €3 billion, well below what everyone expected for that period.

It will be the weakest quarterly profit since the second quarter of 2011, and the main reason why many believe Samsung will incur a loss instead of a profit for the whole year, as we said before.

The why of the financial decline

The mobile business is the biggest reason for this. Samsung's presence on the smartphone front has been getting shaky, and its short-term stability is in question. Its share dropped during both the second and third quarters. In fact, Lenovo and Xiaomi are gaining on it.

Chinese companies like them have the advantage of low prices, this being the main cause behind Samsung essentially losing some hard-earned turf.

Admittedly, new products like the Galaxy Note 4 smartphone and Galaxy Gear S smartwatch will help boost finances for the short term, but on the long term, the mobile division will have trouble keeping up. That's what many analysts think anyway. The popularity of Galaxy phones isn't what it used to be.

The rest of Samsung's operations aren't helping much either. Laptops are steadily losing customers, as usual, and the display division, especially that of TVs, has nothing unique to offer, especially with LG matching Samsung low for blow there.

Sure, Samsung released a bendable curved TV, but that's a premium product if ever there was one, and we all know that it's the mainstream customer base that brings in most of the cash.

The single bright spot in Samsung's operations

The Samsung processor business is the only one doing more or less fine at the moment, having even exhibited an increase in profit, quarter-on-quarter. It's so good that Samsung intends to spend over 14 billion dollars / 11 billion Euro on a new chip factory in Pyeongtaek, south of Seoul, where 150,000 people would be hired.

Unfortunately, we'll have to wait until the actual financial result are posted to find out specific earnings numbers.