Samsung Electronics Co. lost $25.3 billion in market capitalization last month, more than the total value of competitor Sony Corp., as sales of its flagship Galaxy S4 smartphone fell short of investor expectations.
Since the handset was released April 26, the company that sells nearly one of every three mobile phones has plunged 9.7 percent as JPMorgan Chase & Co. and Morgan Stanley lowered sales forecasts and cut profit estimates. Fifteen analysts cut second-quarter net income estimates for Samsung this month, according to data compiled by Bloomberg. The company declined to comment on its share price and S4 sales.
Manufacturers of high-end models in the $358 billion mobile-phone industry are suffering as consumers hold off on buying expensive handsets that aren’t considered innovative. Apple Inc. fell 9.4 percent in the month after releasing the iPhone 5 while China’s Huawei Technologies Co. and ZTE Corp. sold smartphones costing about $100, or about an eighth the price of the S4 in South Korea.
“Consumers find no good reason to buy the S4 since it has no big difference with its predecessor,” said Oh Sang Woo, an analyst at Leading Investment & Securities in Seoul. “Chinese companies are becoming a bigger threat to Samsung than any other players.”
The Galaxy S4 — with a 5-inch screen, 13-megapixel camera and motion-detecting software — is one of three high-end handsets being released by Samsung this year. The device is part of the company’s plan to win customers from Apple, which was the top smartphone seller in the U.S. in the last quarter of 2012.
Samsung said May 23 it sold 10 million units of the S4 within a month of its release — about half the time it took the S3 to reach that benchmark. Two weeks later, JPMorgan and Morgan Stanley lowered their sales estimates for the year, citing supply-chain checks.
JPMorgan cut its profit estimate for Samsung by 9 percent while revising its sales estimate to 60 million this year from 80 million.
Morgan Stanley reduced its earnings estimate by 1.6 percent and lowered sales expectations to 61 million units from 71 million, analysts led by Shawn Kim said. The world’s largest mobile-phone manufacturer also reduced monthly orders of components from suppliers, according to Kim.
Samsung shares declined 12.7 percent last month, the most since May 2012.
The company is scheduled to release second-quarter operating profit and sales figures on July 5. Operating profit was 10 trillion won ($8.8 billion), according to the average of 33 analyst estimates compiled by Bloomberg. Sales were 58.5 trillion won, according to the average of 37 estimates.
Samsung is looking to retain smartphone customers through a new, open-source platform called Tizen as it seeks to reduce its reliance on Google Inc.’s Android software. Suwon, South Korea-based Samsung will release a Tizen-based phone as soon as August, the company said in March.
Samsung introduced a lower-priced S4-mini in May to help compete in emerging markets and offset a sales slowdown in the high-end market, Oh said.
The company also plans to acquire communications, health and education businesses to bring features to handheld devices to compete with Apple, David Eun, an executive vice president, said last month.
“Apple is also expected to release a lower-end smartphone for the mass market,” said Lee Jin Woo, a fund manager at KTB Asset Management. “Given that Samsung may also have to expand its lower-end product lineups, it’s inevitable that their mobile-phone margin will also be squeezed, at least from the second half of the year.”
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