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Samsung Group Earnings Surprise Despite iPhone Sales

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Samsung Electronics Co Ltd (KRX:005930) showed an increase in earnings for the three months through the March when it released preliminary numbers late on Monday. The South Korean electronics company makes up about 70% of the revenue of its parent Samsung Group, and is the flag carrier in the company’s ongoing transformation.

Samsung Galaxy S6 and S6 Edge

According to the numbers released by the Samsung Group, the company managed an operating profit if $5.4 billion in the first quarter of 2015. That’s down from a year ago, but the good news is in the margins, which had been declining for some time. The Samsung Electronics gross margin hit 7.5% in the three month period, the first rise in more than a year.

Samsung Group battles iPhone surge

The real problem for Samsung Group last year was the dominance of the iPhone. After releasing a large-screen smartphone, Apple Inc. (NASDAQ:AAPL) began to dominate the market even more than before. Samsung Electronics Co Ltd (KRX:005930) profits were down 30.5% in the first quarter as a result. Analysts were expecting first quarter profits to drop by around 35% by consensus.

Revenue in the three month period fell to 47 trillion won, around $43 billion US Dollars, down 12% from the year before. The major story is still in the company’s margins which crashed below 10% last year after coming close to 20% in the years of dominance at the low end of the smart phone market. Samsung Group is looking to solidify its smart phone base in order to give the wider company room to grow in all directions.

Samsung Group transformation continues

The Samsung Group as a whole is attempting to reform itself after a major change in the smart phone world continues to bring about substantial change. Many home-grown Chinese companies are now dominating low-margin smart phone sales in emerging markets, and the Apple iPhone is performing better than could ever have been expected.

The Samsung Group is expecting the Galaxy S6, its flagship smart phone for 2015, to dwarf sales of its previous effort, but that won’t be enough for the company to regain its previously comfortable position. Expansion in other areas is currently one of the company’s major goals.

The semiconductor and display businesses are chief among the targets of the Samsung Group. If the South Korean company can’t dominate the smart phone market it can at least dominate the market for smart phone internal components. That is, it appears, the logic that Samsung Electronics Co Ltd (KRX:005930) management is operating under.

Samsung Group shares continue rise

Shares in Samsung Electronics co Ltd (KRX:005930) have done well in 2015 so far despite the company’s brewing problems in the smartphone market. Since January 1 shares in the company have increased in value by more than 10%. In the last year the firm’s shares have increased by more than 6%.

A 52 week high set in mid-March is being approached following the revelation of the company’s sales figures for the fourth quarter of 2015. Samsung Electronics shares are currently trading at 1,462,000 won each, and are marginally down for the day on the Seoul stock market.

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