Savage Garden

Samsung, like Apple, warned of weaker profits

Image source: StudioPhotoDFlorez, Photo_SS, alexkich, alexandarilich, Surachet Meewaew - Shutterstock

What's going on?

There were more sour grapes in the tech orchard on Tuesday as South Korea’s Samsung followed Apple in warning investors that its quarterly profit would be lower – almost 30% lower – than a year ago.

What does this mean?

Déjà vu: it happens when they change something. It was only a week ago that Apple issued its own damped-down forecasts, and Samsung Electronics made similarly negative noises. The world’s biggest phone maker blamed weak demand from China – and some fallout from the US-China trade war – for its “low battery” warning.

Samsung’s profits had previously been charged up by sales of computer memory chips to the likes of Amazon, as well as other mobile phone companies (including Apple). But demand’s fallen flat. Samsung also enjoys good profit margins on its sales of display electronics, including the flexible screens used in none other than Apple’s new iPhones. With those sales squeezed, it’s no surprise Samsung’s low-hanging too.

Why should I care?

For markets: Too smart(phone) for their own good.

Samsung joined Apple’s rainy parade on Tuesday as its shares fell 2%. Cut-throat competition from cut-price Chinese competitors Huawei and Xiaomi leaves other smartphone makers with little choice: slash tags to get more competitive or maintain prices at the risk of losing customers. But as people hold onto existing phones for longer, falling smartphone shipments worldwide are dialing down sales at all phone makers. While Apple’s felt the cold most bitterly, losing over a third of its value in the last three months, shares of Samsung and Xiaomi have also fallen a tangy 15% and 18%.

Zooming out: And the Golden Globe goes to… Netflix.

The streaming service swept the floor at Sunday’s awards, lending weight to analysis from investment bank Goldman Sachs, which last week raised its valuation of Netflix’s shares. Goldman thinks the investments in original content that helped Netflix bag the gongs will help it grow subscriber numbers beyond investors’ imaginations. The results remain to be seen next week (for those without blindfolds)…

Originally posted as part of the Finimize daily email.

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