Samsung Posts Disappointing Profits Forecast

Samsung has forecast weaker than expected profits for the last quarter, fuelling concerns about flagging demand for high-end smartphones.

The South Korean firm is predicting £5.5bn in operating profit for the period April to June.

That would be a record result for the electronics giant - but lower than the £6bn forecast by analysts.

Samsung shares dropped nearly 3% after the company issued the profit guidance on Friday.

Concerns about sales of Samsung's new phones and tablets have seen the electronic giant's share price drop almost 18% in the last month.

Mobile phones and IT account for 70% of the company's profits.

Despite robust sales of its Galaxy S4 in the first month, new rivals have emerged to eat away at its market share.

It has also become harder for the industry to impress buyers with new features in upgraded models as most smartphones offer similar functions.

Fewer wow factors in new smartphones mean people will not upgrade as quickly as they did when the devices were still a novelty, forcing device makers such as Samsung to spend more on splashy advertising and marketing.

Analysts say high marketing costs probably weighed on Samsung's mobile business despite sales of the S4 hitting the 10 million mark about 20 days faster than the previous model.

"Because of the marketing costs, the telecommunications business was probably weaker than expected," said CW Chung, an analyst at Nomura Financial Investment in Seoul.

Samsung will announce its net income and final quarterly financial results later this month.

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