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The Samsung Galaxy S5 Lacks Staying Power

By Tim Beyers - Jul 13, 2014 at 4:00PM

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Three Fools take to the Internet to review the South Korean giant’s questionable tactics, recent results, and an apparent lack of sustained interest in the Samsung Galaxy S5.

After a burst of enthusiasm, operating losses suggest lagging demand for the Samsung Galaxy S5. Credit: Samsung.

Samsung Electronics (NASDAQOTH: SSNLF) saw operating profit fall 24% in the second quarter. Then, earlier this month, a band of thieves made off with $6 million worth of gear in a night raid on the company's Sao Paulo plant -- which seems to be about the only way the company can move the Samsung Galaxy S5 right now. Can investors trust management to produce outsized stock returns?

Guest host Alison Southwick puts this question to Fool analysts Nathan Alderman and Tim Beyers in this episode of 1-Up on Wall Street, The Motley Fool's Web show in which we talk about the big-money names behind your favorite technology, movies, toys, video games, comics, and more.

Nathan says there are good reasons to distrust anything Samsung says. In 2008, Chairman Lee Kun­-hee, son of the company's founder, was convicted of evading $93 million in taxes on $3.8 billion in income, which he allegedly hid in stock accounts under his aides' names. He was also accused, but never convicted, of using a slush fund to bribe government officials. In 2009, South Korea's president gave him a full pardon for this three­year suspended sentence.

Kun-hee is also alleged to have stolen up to $10 billion from Samsung, and to have used company funds to buy up subsidiaries and give them to his son. If any of these allegations are proved true, it would cast even more of a pall over Samsung's stock.

Tim says a huge drop in operating profits raises doubts about the company's earlier claim that it sold 11 million Samsung Galaxy S5 handsets in the first month of release. The company has certainly done its share to confuse the market. As Foolish colleague Ashraf Eassa reports here, rumors of premium variants of the Samsung Galaxy S5 arose even as the handset launched worldwide. Buyers may be waiting to see if these still-unseen handsets have the wherewithal to take on Apple's (AAPL -0.09%) forthcoming iPhone 6.

Now it's your turn. Click the video to watch as Alison puts Nathan and Tim on the spot, and then leave a comment to let us know your take on the long-term prospects for the Samsung Galaxy S5. You can also follow us on Twitter for more segments and regular geek news updates!

 

Alison Southwick has no position in any stocks mentioned. Nathan Alderman and Tim Beyers own shares of Apple. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. 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.

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