Despite it struggles with other competitors, Samsung Electronics Co. is optimistic that its third-quarter profit will rebound after almost two years of sales decline. Now, earnings have increased 80 percent while shares surged the most in more than six years. The recent upsurge was due to a revamped smartphone lineup and a renewed focus on components gains traction.
This year, Samsung Electronics Co. struggled against Apple Inc. and Chinese makers. But the rise in its third-quarter profit have beat estimates and have broken a series of seven consecutive declines. According to Bloomberg, the South Korean multinational electronics company came under siege from iPhones at the premium end of the market and from Xiaomi Corp.'s inexpensive devices that won over budget consumers.
Even though Samsung climbed to the top of the global smartphone market, it has been struck hard by saturation in the high-end market and intensifying pressure on the low end. Fortunately, the rise in the company's earnings this quarter marks a change for the company.
Aside from its revamped smartphone lineup, Samsung likely benefited from the strong demand in its components business, which supplies parts for Apple and other tech companies, CNET noted. It builds some of the processors in Apple's new iPhone 6S, which hit the market last month and sold in record numbers the first weekend it was available.
Samsung Electronics estimated its third-quarter operating profit would jump 80 percent from a year ago to 7.3 trillion won ($6.3 billion), which is higher than a 6.7 trillion won profit Thomson Reuters SmartEstimate obtained from 30 analysts.
"There were worries that overall earnings will continue falling as mobile profits declined, but now the numbers make the case that Samsung has the capacity to withstand weakness from the mobile business," IBK Securities analyst Lee Seung-woo said, as per Reuters.
In spite of the fact that Samsung stock leaped 8.7 percent, which is the biggest daily percentage gain in nearly seven years, it remains down 5.7 percent so far this year. It actually underperformed a 4.7 percent advance for South Korea's benchmark index due to the long-standing worries about its earnings outlook.
In line with the expectations, Samsung Electronics Co., also known as the world's No.1 maker of smartphones and memory chips, guided for a 7.5 percent revenue increase for the third quarter. Meanwhile, it gave no further details about its performance but will disclose full results in late October.