Samsung Sales Struggle Amid Craze for Tablets

By Doug Rule | Thu Apr 07, 2011 2:20 pm

Samsung today posted its second straight drop in profit, as consumers delay buying new TVs and gravitate toward competitors in the tablet and phone markets.

The South Korea-based company, the world's largest maker of TVs and memory chips, estimated its first-quarter profit dropped 34 percent from a year earlier, to $2.7 billion. Both the company's latest TV models, with 3-D functionality and Web-based services, and Samsung's Galaxy tablet, have failed to generate as much demand as hoped.

"People have only limited budgets to spend on technology products," said Lee Jin Woo, a fund-manager at South Korea's KTB Asset Management. "There are all these smartphones and tablets in the market, and their incomes are not rising. TV demand may stay weak for the rest of the year."

Consumers may be confused by all the new TV technologies and standards and opting to wait to see which ones stick, according to analysts. And Apple's insanely popular iPad has so far fended off competitors such as Samsung, with the iPad 2 even winning endorsement from Consumer Reports as the best tablet on the market. Meanwhile, efforts by Sprint and Verizon to cut the price of the Galaxy Tab has thus far not improved its standing against the iPad.

Falling prices across the board, for TVs as well as mobile devices, have cut into Samsung's profits. But rising prices for mobile chips, especially given the March 11 earthquake in Japan that has disrupted Japanese manufacturing, should cushion Samsung's earnings for the rest of the year.

The company is also set to roll out a broader range of tablets, including a Wi-Fi-only device on April 10 that may find a place in the lower-priced Android tablet sector. With other upcoming models offering higher-end specs, Samsung's range of tablet price points may find an audience, but although it may still find it hard to compete against the all-mighty iPad 2, which is competitively priced for the market.

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