The price of Samsung shares have dropped by over 6 per cent after the company’s recent introduction of two new versions of its flagship Samsung Galaxy S4.
Slowing sales for the Samsung Galaxy S4 coupled with the introduction of the Samsung Galaxy S4 Active and Samsung Galaxy S4 Mini have prompted Samsung shares to dip by 6.2 per cent, the largest drop the company has seen in the past nine months.
The share price tumble cost the company more than £7.7 billion in its market capitalisation, prompting fears that the profit margins for Samsung’s mobile business will soon suffer.
Although some believe that the Samsung Galaxy S4 Active and Galaxy S4 Mini will help Samsung solidify its place as the market leading smartphone manufacturer, others are worried that the company is opting for volume over profit.
Last month, Samsung announced that the flagship Samsung Galaxy S4 is now its fastest selling handset, reaching the 10 million sales marker less than a month after launch. Now, the Samsung Galaxy S4 sales are slowing.
“Sales of high-end handsets are lagging behind expectations, while low- to mid-end handsets are selling briskly worldwide”, said Kim Young-chan, an analyst at Shinhan Investment Corp. “As the portion of low- to mid-range handsets is expected to increase in Samsung’s overall mobile phone business, this has also sparked concerns about thinning margins and lower growth.”
It was revealed this week that Apple will soon offer an iPhone trade-in scheme to boost iPhone 5 sales, allowing users to part-exchange their older models for the latest version of the handset.
“With Apple widely expected to announce an older iPhone trade-in program and also a new cheaper iPhone, overall growth prospects for [Samsung’s] smartphone business have dimmed,” said Kim Hyun-yong, an analyst at E*Trade Securities. “Second-quarter results will be solid but we have to see whether the trend can be sustainable going forward.”
Next, read our Samsung Galaxy S4 vs iPhone 5.