Samsung Stumbles As Apple Soars

As Samsung's mobile profits decline, Apple gears up for a potential iPhone sales explosion later this year.

Apr 29, 2014 at 8:36PM

It's no secret that Apple's (NASDAQ:AAPL) most dangerous rival is Samsung (NASDAQOTH:SSNLF), the South Korean electronics giant that saw its fortunes surge when it decided to follow Apple's lead in the smartphone market. Today, Samsung Electronics is one of the most profitable companies on the planet, having generated a whopping $8.24 billion in operating income in the most recent quarter. That said, as great as Samsung's financial results are in an absolute sense, the trend is starting to look less encouraging.

Mobile sales down year over year -- does it get worse?
In the most recent quarter, Samsung's total sales were up slightly at 53.68 trillion KRW from 52.87 trillion KRW a year ago (this is a 1.53% year-over-year increase). Interestingly enough, though, is that mobile sales were down from 32.17 trillion KRW ($31.24 billion) to 31.36 trillion KRW ($30.45 billion) (a decline of about 2.5%). While the newly released Galaxy S5 and the refreshed Galaxy Tab/Note series will help in the current quarter, it's starting to look pretty difficult for Samsung's mobile group.

In particular, at the high end, Apple seems to be solidifying its position and could gain even further market share with the larger iPhone that is rumored to come out during the second half of the calendar year. In the Android space, many competitors -- such as Lenovo (NASDAQOTH:LNVGY), HTC, and Huawei -- are very aggressively pushing premium-spec'd phones at lower prices as they do not need the high profit margins Samsung currently commands.

Semiconductors -- driven by memory -- looking good, though!
While Samsung's total device sales and profit have come down on a year-over-year basis, the company's semiconductor business continues to boom. Indeed, sales -- driven mostly by memory -- were up 23% year over year. Thanks to consolidation in the memory markets, coupled with strong demand growth driven by the mobile and data-center booms, memory has been extremely good to all of the remaining players, of which Samsung is the largest.

Interestingly, if we strip out the memory numbers for Q1 2014 and Q1 2013, we see that Samsung's non-memory semiconductor business did about 3.46 trillion KRW ($3.36 billion) in 1Q 2013 and 3.1 trillion KRW ($3.01 billion) -- a 10.4% decline. This business includes CMOS image sensors, LEDs, and Exynos applications processors. In the earnings release, Samsung indicated that the decline quarter over quarter was caused by seasonally weak demand but didn't give color on the year-over-year decline.

Apple's chance to strike?
Apple's iPhone 5s and 5c have apparently been enough to start turning the screws on Samsung as well as some of the other mobile vendors. Given that even Apple acknowledges that there is real demand for larger screen devices, the opportunity for Apple to gain share and really knock it out of the park during the next fiscal year is very real. It is this anticipation that caused Apple's shares to soar following the most recent earnings report, and it is likely not misplaced.

Foolish bottom line
Samsung's life only gets more difficult as the rest of the Android market begins to fight for that Android smartphone/tablet share. Of course, Samsung's extremely large marketing budget will probably help it defend its position, but as Apple has proven, smart marketing can be just as -- if not more -- effective than simple brute-force marketing. It'll be interesting to see if Apple's larger iPhone, coupled with the mounting threat in the Android space, will serve to further erode Samsung's mobile profits. The tale will likely be written as we exit 2014, so stay tuned!

Apple's iPhone was big, but this $14.4 trillion revolution is even bigger!
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

Ashraf Eassa has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information