[Tech] Samsung’s upcoming Q1 earnings are going to be ugly

It’s that time again folks, Samsung has reported guidance for its upcoming Q1 quarter — and things don’t look good.

Samsung is forecasting that revenue for the quarter will reach 51-53 trillion KRW ($44.87-$46.63 billion), which would represent a drop of around 15 percent on one year previous. The Korean tech giant reported a record operating profit in Q1 2018 — $13.76 billion — but this time around that is forecast to fall by a whopping 60 percent for the current quarter of business. According to Bloomberg, that would be the company’s worst slump for four years.

Following a record year is never going to be easy, but the forecast Q1 2019 operating profit of 6.1-6.3 billion KRW — around $5.5 billion — represents a pretty steep 43 percent drop on the previous quarter. That’ll give Samsung shareholders plenty to worry about.

The company’s pre-earnings guidance doesn’t go into details on the predictions, but last year’s record profits were largely down to the success of its consumer handset business and also a strong market for memory chips. There have been plenty of warning signs that those good times might not last.

Samsung itself played down those impressive Q1 2018 results multiple warnings on the future — my colleague Brian Heater pointed out that the words “slowing growth” appeared seven times in Samsung’s announcement at the time — due to concerns around the company’s display panel business and a slowing growth within the general smartphone industry.

As we well know, analyst reports show that people are buying fewer phones for a range of reasons. That’s one explanation for Apple’s multi-device approach which pushes its top-of-the-range model to well beyond the $1,000-mark. Slowing growth means a need to extract more revenue from the most loyal users, to thus increase the overall average selling price (ASP).

Samsung has long played in the mid-tiers — where it is up against tough competition from the likes of Xiaomi, Oppo, Huawei and others from China — but it’ll be interesting to see if it shifts its top-end approach.

We’ll know more when the company releases its full Q1 earnings report later this month so stayed tuned.