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Samsung’s Q1 2019 earnings guidance suggests a 60% drop in profit

Samsung just released its earnings guidance for the first quarter of 2019, and things don’t look good. The company estimates a 60 percent year-on-year decline in operating profit in the three months ended March. Samsung was already expecting this steep decline, and had issued an unprecedented warning for investors of bad news on the way.

Samsung recorded its highest ever profits in Q3 2018, but weak demand of memory chips has since hurt the company badly. It suffered a 29 percent decline in operating profit in the last quarter of 2018.

Samsung’s worst slump for four years

In a regulatory filing, Samsung estimated sales worth 52 trillion won (about $45.7 billion) during Q1 2019. This is down 11.86 percent from 59 trillion won (~$51.87 billion) in the previous quarter, and down 14.13 percent from 60.56 trillion won (~$53.24 billion) a year earlier. Samsung suffered even bigger drop in operating profit. With an estimated profit of 6.2 trillion won (~$5.45 billion), the company is looking at a 60 percent decline from 15.64 trillion won (~$13.74 billion) in Q1 2018.

According to Bloomberg, this is Samsung’s biggest slump since a similar drop in the third quarter of 2014. Declining prices of memory chips, and lower demand for OLED displays are causing this slump. Samsung has already started reacting to it by putting more focus on non-memory chips and foundry business.

The company recently begun mass producing its 5G chipsets. Samsung would also be hoping the Galaxy S10 5G and the Galaxy Fold to bring a change in its fortune. The former is now on pre-sale in South Korea, whereas the latter will be available starting April 26.

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