Samsung Pay Is Still On Track, Galaxy S6 Is Fine After Plunging Q1

For Samsung, the good news is that Samsung Pay is on track and its just-out-this-month Galaxy S6 Edge smartphone is selling out. But that didn’t help its Q1 earnings, which plunged 39 percent as the company sold more less-expensive smartphones and the bottom dropped out of the TV and large-screen video display market.

Sales for most of Samsung Electronics — which sells products ranging from chips and mobile phones to TVs and air conditioners — edged down slightly from the previous quarter, the company announced on Thursday morning (April 29) Korea time. But consumer electronics fell 28 percent, with a 36 percent drop in large-format video displays, hurt by the strong Korean won that raised prices for Samsung’s consumer products across much of the world. The result was a net profit of 4.6 trillion won ($4.3 billion), missing analysts’ 4.9 trillion won expectations.

For mobile phones, operating profits were down 57 percent from Q1 2014 to 2.74 trillion won ($2.56 billion) — but that was still up almost 40 percent from the previous quarter. And in semiconductors and display panels, where Samsung makes more money when Apple sells more iPhones, profits were up by 50 percent from a year ago to 2.93 trillion won ($2.74 billion), up 8.5 percent from Q4 2014.

Overall smartphone sales were “about mid-80 percent” of the 99 million mobile phones it sold in the quarter, the company said. That would be roughly 10 million more smartphones than it sold in the previous quarter, despite the fact that Samsung faced tough competition from Apple’s large-screen iPhone 6 models on the high end against the aging Galaxy S6, and a new threat in budget-priced smartphones from Xiaomi, which briefly took over the top sales spot in China.

And all that was before this month’s rollout of the new Galaxy S6 and S6 Edge, which should make for a cheerier Q2 for Samsung’s smartphone division. The Edge, with its wrap-around screen, is selling so strongly that it’s in short supply — a problem that will be resolved by June, the company said.

Samsung said the new models have been outperforming the Galaxy S5 in early sales, although it was the S5’s disappointing market performance a year ago that began Samsung’s slide from the top of the smartphone market at the same time as Apple’s rise. Samsung execs wouldn’t comment on how the S6 models compare with sales of the S4.

And what about Samsung Pay? JinYoung Park, VP of Samsung’s mobile communications business, wouldn’t give details when asked on the analyst call about whether Samsung has signed up more banks, payment card issuers or merchants for the mobile payment system.

“We are expecting the overall mobile payments market to rapidly grow, and in response to this anticipation of fast growth we have been preparing the Samsung Pay service,” Park said. “As you know, one of the advantages of Samsung Pay is that it can also be used on a magnetic strip [POS device], which means that it will provide very high accessibility in the existing credit-card merchant base to the consumers, so this high accessibility is a very high advantage to Samsung Pay. Also, in terms of security, we have prepared a triple security approach, where we use not only a credit card’s encryption but also fingerprint and the Knox system to provide a very secure and safe platform.”

He added, “In terms of our plans, we are planning to launch Samsung Pay in Korea and in the U.S. during the second half of this year. We are currently considering the rollout to other countries going forward.”

Park also wouldn’t talk about whether a future Samsung smartwatch will support Samsung Pay. “Because that does touch upon the specs of our future products, I hope that you will be able to gain more information about that when we launch our next smartwatch,” he said.