Phone woes drag Samsung result down

Samsung sees seventh straight profit decline says the Wall Street Journal as the world’s largest phone maker turns in another poor result.

The report says sales of the latest Galaxy S6 phones were lower than expected. Although the company doesn’t break out quarterly results by division, the WSJ says the company's semiconductor business is booming and by deduction says the phone business is struggling.

It’s not all bad news for Samsung. The report goes on to explain the electronics giant misjudged the proportions for its Galaxy S6 and S6 Edge models. So it had too many of the less popular and, one imagines, less profitable S6 phones but not enough of the Edge phones to meet demand.

The WSJ also says Samsung has a glut of white S6 models on its hands.

When having a hit phone doesn’t help

In other words even having a hit product isn’t enough to lift Samsung’s phone sales performance. The electronics giant’s profits have fallen for seven quarters in a row and almost all that is down to its flagship Android phones falling to meet internal expectations.

Fixing the supply problem may not be enough to lift the company’s fortunes. Unlike Apple, which launches phones late in the year and tends to enjoy steady sales, Samsung generally launches new models with a hiss and a roar, sees a surge of sales immediately after a new model appears with interest tailing off in six months or so.

There’s another issue. Apple enjoyed higher than usual US sales at the end of 2014, some analysts believe that pulled forward upgrades for people who get phones on carrier plans from early 2015. All the big Android brands in the U.S., Samsung, HTC and LG pushed out their 2015 models into a market that had already been satisfied.

Samsung’s rise and fall

For years Samsung rode a growth wave as sales of its popular Galaxy S models zoomed past all-comers to dominate the market. That success hit a wall last year when customers didn’t warm to the Galaxy S5 models. It has also run into trouble with falling margins.

It doesn’t help that Samsung can’t maintain prices. When Apple sets the price of an iPhone, that’s it for the year. It may go up or down if the local currency moves, but Apple doesn’t drop prices until new models arrive. Officially Samsung does the same, but in practice, the phones launch at a premium price and drift down.

Spark lists the 32GB Galaxy S6 Edge at an eye-popping NZ$1350. Parallel importers offer the same model for NZ$250 less.

Samsung expensive when compared with peers

Even so Samsung phones still look expensive when compared to models with similar specifications. Android fans can satisfy their desires with Nexus phones which cost about half the price of the S6 models. There are also models from brands like Huawei’s nifty P8 a plausible rival at about two-thirds Samsung’s price.

The Samsung Galaxy S6 phones are quality products. They show off the company’s engineering and design skills. There’s even innovation with the brave, quirky curved display of the Edge. Both phones tick all the important boxes. They deserve success and, despite the supply glitch, they have achieved good sales.

Yet Samsung can’t make the high-end Android phone business pay. Its products are underperforming, by the company’s own exacting standards. Samsung can’t afford for its next phones to be incremental tweaks of existing designs. It’s time for a strategy reboot.