Samsung loses $12bn market value on smartphone worries

Samsung Electronics Co. lost $12 billion (€5.28 billion) in market value yesterday, hit by brokerage downgrades that have underscored concerns about slowing sales of its flagship Galaxy S4 smartphone.

The share slide of more than six per cent comes after it recently introduced two stripped-down versions of the S4, fanning worries that profit margins for its mobile business will suffer. It also follows a report that arch-rival Apple will begin a trade-in programme for iPhones.

The new stripped-down S4 models will help it widen its lead in the global smartphone market and fend off Chinese competitors, but some fear that the South Korean tech giant is trading in profits for volume.

Analysts say sales momentum for the high-end version of the S4, which became its fastest-selling smartphone since its launch in late April, has slowed.

“Sales of high-end handsets are lagging behind expectations, while low- to mid-end handsets are selling briskly worldwide,” said Kim Young-chan, an analyst at Shinhan Investment Corp.

“As the portion of low- to mid-range handsets is expected to increase in Samsung’s overall mobile phone business, this has also sparked concerns about thinning margins and lower growth.”

Apple will start a programme this month to allow users to trade their older iPhones for the newest model, Bloomberg news agency cited people familiar with the plan as saying, a first for the company as it prepares to introduce a new version of the smartphone.

“With Apple widely expected to announce an older iPhone trade-in programme and also a new cheaper iPhone, overall growth prospects for (Samsung’s) smartphone business have dimmed,” said Kim Hyun-yong, an analyst at E*trade Securities.

“Second-quarter results will be solid but we have to see whether the trend can be sustainable going forward.” (Reuters)