Earlier in the year one of the first major signs that Samsung might significantly underperform near-term expectations came when it warned investors about a huge 24% decline in their operating profits. Citing challenges with currency, cannibalization of its smaller tablets by phablets and headwinds against the sales of their other smartphones, news about the company since then has continued to worsen.
One of those bits of news is the fact that the iPhone 5S, which Apple released nearly 8 months ago, is still outselling their flagship smartphone, the Galaxy S5, even though it was released just recently.
In fact, the iPhone 5S was still the best-selling smart phone in the world as of May, going directly against what was predicted by most analysts. The Galaxy S5 might have come in second place but, in even worse news for Samsung, it was a very distant second.
Not only that but the total amount of smart phones overall that Samsung is selling declined in the second quarter of 2014 as opposed to sales from last year’s second quarter.
It’s widely believed that Apple is one of the main reasons for the poor results that Samsung is now having, and that probably won’t change with Apple’s third fiscal quarter earnings report that’s coming out soon. Analysts have predicted it will show a 12% increase from a year ago, which would be a third-quarter record.
With all signs pointing to the release of two new, bigger iPhones in the very near future, it’s likely that Samsung is going to feel the pinch from Apple in the near future as well. Right now Samsung is benefiting from the fact that Apple is absent in the large screen smart phone category, but the launch of the iPhone 6, which reportedly will come in both 4.7 inch and 5.5 inch screen sizes, will quickly put an end to that.
This is likely to appeal to both fans of the ubiquitous iPhone and fans of the new, larger size ‘phablet’ phones. For example, a recent survey by Counterpoint showed that nearly 40% of all smart phones sold globally in May were the bigger screened phablets, a huge increase in the last year. It’s predicted that the 5.5 inch iPhone 6, if rumors are true of course, will be an instant hit among fans of these bigger smart phones.
Apple investors are thus in a very fortunate position, since consumers have already proven that smart phones with larger displays are in demand. After taking advantage of Apple’s absence and riding the recent success of phablets, Samsung will find itself in a much tougher position going forward, especially as it appears that sales of their smart phones have peaked.