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Samsung vows changes after mobile profit plunges

By WTOP Staff

YOUKYUNG LEE
AP Technology Writer

SEOUL, South Korea (AP) — Samsung Electronics Co. admitted erring in its smartphone strategy and vowed Thursday to overhaul its handset lineup after profit from those devices tumbled last quarter to the lowest in more than three years.

The South Korean company, which climbed from smartphone laggard to top seller in the past three years, had prided itself on responding quickly to market demand and ability to tailor handsets to the needs of users and mobile carriers around the world.

But its rapid success with a product category pioneered by rival Apple Inc. is undergoing an equally stunning reversal. Earnings from Samsung’s mobile phone business began declining this year, undermined by lukewarm sales of the Galaxy S5 smartphone and the competitive onslaught from cheaper local brands in China and India. Apple also eroded Samsung’s leading market share in developed nations.

In a rare acknowledgement of a misstep, the company’s head of investor relations told an earnings conference call that Samsung had lagged behind changing market conditions. The company’s response “was not quick enough,” said the executive, Robert Yi.

It plans a significant change in smartphone strategy for next year to seek more “efficiency,” implying that the number of new handset models might be reduced. That will allow the company to better focus on each product and to purchase components at cheaper prices to save costs.

Unlike Apple’s take it or leave it approach, Samsung boasted that it gave more choice to consumers, launching at least two flagship models per year and making smartphones in a variety of screen sizes and various features.

The drop in earnings from the mobile business battered the South Korea company’s quarterly net profit, which tumbled 49 percent to 4.2 trillion won ($4 billion). That was the lowest since the first quarter of 2012, but above market expectations. Analysts polled by FactSet had predicted net income of 3.7 trillion won.

Operating income from its mobile business, which previously had contributed more than 60 percent of its entire earnings, fell to 1.75 trillion won ($1.66 billion) from 6.7 trillion won a year earlier.

Quarterly sales fell 20 percent to 47.4 trillion won while operating income shrank 60 percent to 4.1 trillion won.

Samsung warned earlier this month that its handset profit had declined despite a marginal increase in shipments. Analysts said the Galaxy S5 smartphone launched in April did not sell well while many consumers held off upgrading their phones, instead waiting for new iPhones.

“High-end smartphone sales result was somewhat weak,” said Kim Hyun-joon, senior vice president at Samsung’s mobile communications business. “We will fundamentally reform our product portfolio.”

Samsung retained its leading position in the global smartphone market during the third quarter, but it was the only top five handset vendor to record a sales decline. Apple, Xiaomi, Lenovo and LG Electronics all posted more than 15 percent growth in their smartphone shipments, according to market research firm IDC.

Samsung’s shipments fell 8 percent to 78.1 million smartphones in the third quarter and its market share eroded to 24 percent from 33 percent a year earlier.

Samsung’s rise to the world’s top smartphone maker was largely thanks to its early bet on Google’s Android operating system. But with other Android handset makers catching up in performance, features and design, Samsung is facing pressure to add an impressive and differentiating new feature to its phones.

One of its answers was the Galaxy Note Edge smartphone with a curved side screen that can display icons, news flashes or weather. But with a limited supply of curved displays, Edge smartphone production will remain small. It went on sale in Japan and South Korea this month.

The company gave little detail about how it would differentiate new smartphone’s software or user experience. On the hardware front, Samsung said flexible displays and a metal case will help its new phones to stand out.

With a plunge in smartphone profit, Samsung is increasingly relying on semiconductors. For the first time since the third quarter of 2011, the semiconductor division reported a larger quarterly profit — 2.3 trillion won — than the mobile communication division.

Samsung projected that its earnings would grow in the current October-December quarter, driven by the memory chip business. But it was uncertain whether its smartphone business would recover because it may have to increase marketing expenses to compete with rival handsets and to clear out inventory before the start of 2015.

The Galaxy Note 4 smartphone, which will compete with the big-screen iPhone 6 Plus, will go on sale in more countries during the final quarter of 2014, Samsung said. It is aimed at consumers who like smartphones as big as tablets.

Shares of Samsung Electronics rose 4 percent in Seoul. The result, though weak, was better than the direst forecasts and Samsung indicated it could increase dividends next year.

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Follow Youkyung Lee on Twitter: www.twitter.com/YKLeeAP

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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