Samsung Market Value Slumps $15 Billion on Shrinking Earnings

Aug 01, 2014 6:08 am ET

Aug. 1 (Bloomberg) -- Samsung Electronics Co. slumped a second day in Seoul, pushing the loss of market value for the world’s biggest smartphone maker to $15 billion since posting its smallest profit in two years.

The stock has dropped 7.4 percent, wiping off more than the market value of Korean rival LG Electronics Inc., since Samsung yesterday reported earnings that missed analyst estimates, with profit falling 18 percent on stagnating phone shipments.

Samsung’s dominance is under threat as Apple Inc. lures high-end buyers and Chinese vendors including Xiaomi Corp. and Huawei Technologies Co. attract budget consumers with feature- packed devices at lower prices. The maker of Galaxy smartphones, which has about $58 billion of cash, was the only one of the top five producers to post lower shipments in the June quarter as its market share shrank 7.4 percentage points, according to data from Strategy Analytics.

“Samsung has not only missed the market earnings’ estimate but it also failed to meet investors’ expectation on its much- awaited dividend payouts,” Ko Jung Woo, a Seoul-based analyst at BS Securities Co., said by phone today. “There’s nearly no growth-driven catalyst to boost shares now.”

Samsung yesterday said it will pay an interim dividend of 500 won per share, the same amount it’s paid in eight of the past nine years, according to data compiled by Bloomberg.

Shares of Samsung fell 3.8 percent to 1,292,000 won today. The stock has dropped 5.8 percent this year, compared with a 3.1 percent advance in the benchmark Kospi index, of which it’s the largest component. That’s the company’s biggest two-day drop in almost two years.

Aggressive Response

Samsung was cut to neutral at UBS AG after the result. Nicolas Gaudois, an analyst, said it’s hard to see a profit improvement in 2015 for the company as he cut his share price forecast 3.3 percent to 1,450,000 won.

The company said it plans to aggressively respond to competition for cheaper devices in China while Apple is said to be preparing iPhones with larger screens, challenging a market Samsung pioneered with its Note devices.

The earnings come with Chairman Lee Kun Hee entering his third month in the hospital after a heart attack and as his family prepares to hold initial public offerings for other parts of Samsung Group. The Lee family controls the conglomerate through a web of cross shareholdings and may face more than $5 billion of inheritance taxes.

Samsung’s market share fell to 25.2 percent in the June quarter, with Apple retaining second place and Huawei, Lenovo Group Ltd. and Xiaomi filling the next three spots, respectively, Strategy Analytics said yesterday.

Samsung’s lead in the market for screens larger than 5 inches, which it pioneered with its Note devices, faces a new threat from Apple, which is said to be preparing iPhones with larger displays.