Samsung's profits for the second quarter of the year are down compared to last quarter, the first time that the company's profits slowed down in three years, despite the launch of their latest flagship smartphone Galaxy S5.
The South Korean company reported a net profit of $6.1 billion, lower than the net profit of $7.58 billion that was reported in the same quarter last year. Samsung also posted an operating profit of $7.02 billion for the quarter, which is a 15 percent decrease from the operating profit of $8.23 billion posted in the last quarter and a 25 percent decrease from the operating profit of $9.27 billion posted in the second quarter of last year.
As usual, it is the company's mobile business that contributed most to Samsung's revenue, with an operating profit of $4.31 billion on revenues of $27.72 billion. Sales for smartphones and tablet computers decreased in the second quarter, with Samsung pointing to the "traditionally low" demand for such products during the second quarter of every year.
In addition, Samsung also said that the appreciation of the Korean won contributed to the decline in the company's operating profits, leading to $488 million of missed revenues through the foreign exchange market. However, the company said that it is expecting a lower impact from the foreign exchange market in its earnings for the third quarter.
The difficulty in selling pre-existing inventories of Samsung products in markets in Europe also contributed to lower sales, with the company boosting marketing expenses in the region as a response to the challenges.
Samsung said that the second half of the year will prove to be a challenge to the company, but the seasonality has Samsung expecting third quarter gains from its Consumer Electronics Division with the launch and shipment of the company's premium UHD TVs with curved screens.
"Prospects for growth remain unclear as competition over global market share intensifies in the mobile industry. Samsung expects to see its sales of mobile devices increase with the rollout of flagship products and new models, but profitability may suffer due to a heated race over price and product specifications," wrote the company in Samsung Tomorrow, the official global blog for Samsung.
Samsung's Galaxy S5 went on sale in South Korea before the planned official worldwide launch of April 11 this year when SK Telecom began selling the smartphone on March 27. Several U.S. retailers were able to acquire contract-free Galaxy S5 smartphones from SK Telecom and also began selling the Galaxy S5 in the United States ahead of the planned release schedule.