Samsung q3'14 commentary introduction

Samsung Electronics Results
Q3 2014
Summary and Commentary
Note: Samsung Q3 = Calendar Q3
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Samsung Electronics
•Samsung Electronics is the largest company within the
Samsung Group, a “Chaebol” conglomerate based in
the town of Samsung, in South Korea.
•Samsung Electronics comprises three main divisions,
one of which is usually reported in two parts. These are:
•Device Solutions, which includes:
•The Semi-conductor Division, abbreviated to “Semi”
•and the Display Panel Division, abbreviated to “DP”
•Consumer Electronics Division, abbreviated to “CE”
•IT & Mobile Communications Division, abbreviated to
“IM”. This includes the smartphone and tablet business.
•In 2013, Samsung Electronics accounted for 64% of the
revenue and 92% of the Net Income of Samsung Group
•This report focuses entirely on Samsung Electronics

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Key Data Points
Q3 ’14 (₩) Q3 ’14 ($) Q2 ’14 (₩) Q3 ’13 (₩) YoY ₩
Revenue 47.4 T₩ 45.2 B$ 52.4 T₩ 59.1 T₩ - 20%
Net Income 4.2 T₩ 4.0 B$ 6.3 T₩ 8.2 T₩ -49%
Semi-Conductor Div Sales 9.9 T₩ 9.4 B$ 9.8 T₩ 9.7 T₩ + 2%
DP Division Sales (Display) 6.3 T₩ 6.0 B$ 6.3 T₩ 8.1 T₩ - 23%
CE Division Sales (CE) 11.6 T₩ 11.0 B$ 13.0 T₩ 12.0 T₩ - 4%
IM Division Sales (Mobile) 24.6 T₩ 23.4 B$ 28.5 T₩ 36.6 T₩ - 33%
Smartphone Sales (IDC) Units 78.1 M 74.3 M 80.4 M - 3%
Tablet Sales (IDC) Units 9.9 M 8.5 M 9.7 M + 2%
Note: USD Figures are as reported by Samsung Electronics Source: Samsung Electronics Results, IDC

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27%
24%
21%
18%
15%
12%
9%
6%
3%
Source: Samsung Electronics Results
Net Profit
Net Profit Declines
•Net Profit declined
again to $4.0B, or 9% of
revenues, disappointing
(but not surprising) the
market
•The core reason remains
under performing
smartphone sales due to
increasing competition,
especially from China
•Signs of panic appeared
in rumours of multiple
executive changes in
the IM division
•Samsung is consistently
behind Apple in
profitability, whose net
profitability is now
some 11% higher at
20% of sales
•There were few
currency effects, as the
Korean Won
strengthened a mere 1%
against the USD from
Q3 2013.
Comparative
Net Income
CQ3 2014
Google
Apple
Microsoft
0%
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
Q1
'10
Q2
'10
Q3
'10
Q4
'10
Q1
'11
Q2
'11
Q3
'11
Q4
'11
Q1
'12
Q2
'12
Q3
'12
Q4
'12
Q1
'13
Q2
'13
Q3
'13
Q4
'13
Q1
'14
Q2
'14
Q3
'14
Q4
'14
Net Profit
(%)
Net Profit
(B$)
Samsung Electronics Net Profit
Net Profit B$ Net Profit %

Tablet Units - Peaked? Tracking the trailing 12 months (current and 3
Tablet Units
Tablets kU Tablets Trailing 12m kU
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previous Quarters) eliminates seasonality, and
gives a better indication of the longer term trends
80,000
65,000
50,000
35,000
20,000
5,000
-10,000
Source: Gartner, IDC and others
20,000
15,000
10,000
5,000
0
Q1
'10
Q2
'10
Q3
'10
Q4
'10
Q1
'11
Q2
'11
Q3
'11
Q4
'11
Q1
'12
Q2
'12
Q3
'12
Q4
'12
Q1
'13
Q2
'13
Q3
'13
Q4
'13
Q1
'14
Q2
'14
Q3
'14
Q4
'14
Trailing 12m
Q Units Units (000s)
(000s)

South Korea B$
America B$
Europe B$
Asia/Africa B$
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Regional Splits (to Q2 ’14)
Home Market
Recovers
•South Korea has proved
weak over the past 6
quarters, but recovered a
little, gaining 12% YoY
America Dominates
•The America region
remains the engine of
growth, and grew 14% YoY,
though begins to show
signs of saturation
Europe Fades Further
•29% YoY growth in 2012
has given way to decline in
2014, with a further 11%
drop in Q2. Factors include
market saturation, the gloss
rubbing off the Samsung
machine, and Europe
remaining in recession
Asia/Africa Continues
•A 7% uptick is solid, and
could continue for a while
China Worrying
•Massive 44% growth in
2013 has reversed to a 9%
decline in Q2, amidst
strong local competition
Most recent
Share YoY
10% 12%
34% 14%
19% -11%
21% 7%
15% -9%
Note: Q3 2014 detailed breakdowns not yet available from Samsung
China B$
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Q1
'10
Q2
'10
Q3
'10
Q4
'10
Q1
'11
Q2
'11
Q3
'11
Q4
'11
Q1
'12
Q2
'12
Q3
'12
Q4
'12
Q1
'13
Q2
'13
Q3
'13
Q4
'13
Q1
'14
Q2
'14
Regional Splits

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8%
7%
6%
5%
4%
3%
2%
1%
Marketing Spend (to Q2 ’14)
Heavy Spend - Desperation?
•Much of Samsung’s success in
smartphones, particularly in the US
and Europe, was attributed to massive
spend on advertising and sales
promotion. Peaking at $3.4B in Q4
2012, the spend was clearly high
•Amidst slowing revenues Samsung
almost matched this in Q2, with $3.2B
spend
•Of this Sales Promotion was at its
highest ever, at $2.1B, suggesting
some desperation to keep sales
moving
•The company stated in its results call
that Q3 will see a much lower
marketing spend than Q2 - this data is
not yet available
•Samsung will also be challenged to
match the powerful viral marketing
success of Xiaomi in China, without
the core product differentials that
Apple brings
Tracking the trailing 12 months (current and 3
previous Quarters) eliminates seasonality, and
gives a better indication of the longer term trends
0%
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Q1
'10
Q2
'10
Q3
'10
Q4
'10
Q1
'11
Q2
'11
Q3
'11
Q4
'11
Q1
'12
Q2
'12
Q3
'12
Q4
'12
Q1
'13
Q2
'13
Q3
'13
Q4
'13
Q1
'14
Q2
'14
Q3
'14
Q4
'14
Percent
of Rev
T 12m
Marketing
(M$)
Samsung Electronics Marketing Spend
Advertising M$ Sales Promotion M$ Percentage of Revenue Trailing 12m

Samsung’s Q3 Results Analysis - Full Slide Deck
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Samsung’s Q3 Results Analysis
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Samsung q3'14 commentary introduction

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