Samsung Shares Drop on Fears of Slowing Smartphone Sales

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Samsung’s stock prices experienced its biggest single-day decline in six months on Friday. Analysts and investors are concerned that sales of the Galaxy S4 smartphone could be slowing and that newly released lower-priced models could eat into the S4’s profits.

Miyoung Kim with Reuters reported, “Samsung Electronics Co lost $12 billion in market value on Friday, hit by brokerage downgrades that have underscored concerns about slowing sales of its flagship Galaxy S4 smartphone. The share slide of more than 6 percent comes after it recently introduced two stripped-down versions of the S4, fanning worries that profit margins for its mobile business will suffer. It also follows a report that arch-rival Apple will begin a trade-in program for iPhones.”

The Wall Street Journal’s Min-Jeong Lee added, “Traders said the decline was triggered by a research note from J.P. Morgan analyst J.J. Park, who wrote that shipments of the Galaxy S4 for the third quarter would likely ‘disappoint’ investors, resulting in lower-than-expected margins for Samsung. ‘Our supply chain checks show monthly orders have been cut 20%-30% to 7 to 8 million units (from 10 million) starting July,’ wrote Mr. Park. He downgraded Samsung’s share price target to KRW1,900,000 from KRW2,100,000 previously.”

ZDNet’s Charlie Osborne noted, “The electronics maker unveiled a less powerful version of the flagship phone last week in order to take on rival Apple in developing markets including China. The Galaxy S4 Mini, equipped with a 4.3-inch display, has many reduced specifications; including camera resolution, battery size, processor speed and very little internal storage.”

VentureBeat’s Devindra Hardawar commented, “Samsung’s Galaxy S smartphones have been a smashing success for the past few years — and notably, Samsung’s the only Android manufacturer that’s making a significant profit. After the insane sales of the Galaxy S III (which sold more than 30 million units as of March), any slowdown with the Galaxy S4′s sales could be a huge problem for the company.”