Galaxy S7 boosts sales and profits
The world’s largest smartphone maker reported healthy increases in both revenue and profit this week, thanks in part to its newest flagship the Galaxy S7. Samsung said that during the first quarter of the year revenue was up 5.7% year-on-year and operating profit was up 12% year-on-year.
Net income rose to $4.6 billion, well above analysts’ forecast. Nonetheless, Samsung shares languished on Thursday, as investors worried there is no new device on the horizon capable of repeating the success of the Galaxy S7. Samsung released the S7 in early March, and it retails for less than most other high-end smartphones. The early March release was key, because the S7 beat Apple’s lower-priced model, the iPhone SE, to market.
Today’s news marks a turnaround for Samsung, which has been struggling for more than a year to compete with lower cost Chinese handset makers in emerging markets, and to compete with Apple in the developed markets.
Samsung’s sales increase also stands in sharp contrast to Apple’s results, announced earlier this week. The iPhone maker saw sales slip 13% year-on-year, its first sales decline since 2003.
Both device makers are faced with a slowing smartphone market. Apple pointed out in its earnings release that global smartphone penetration remains below 50%, but nonetheless analysts do not expect smartphone market growth to continue to be as strong as it has been in recent years.
In another sign the smartphone business is slowing down, operating income at Samsung’s chip unit was down more than 10% for the quarter. Samsung foundries manufacture chips for many of the world’s leading smartphones, and for years the company was a major producer of Apple’s custom chips. In addition, the company designs and manufactures its own Exynos line of mobile processors.
