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Smartphones weigh on Sony, Samsung

Shipments are falling as Chinese competition undermines the old Asian tech powerhouses.Shipments are falling as Chinese competition undermines the old Asian tech powerhouses.
Shipments are falling as Chinese competition undermines the old Asian tech powerhouses.Photo: John R. Coughlin/CNNMoney

A slowing global market for smartphones took its toll on two of the industry’s biggest players, eating into profits at both Sony Corp. (SNE) and Samsung Electronics Co. (SSNLF).

Sony slashed sales forecast for mobile devices by 14% to 43 million units after the unit swung to a loss of 2.7 billion yen ($263 million) in the three months to June, from a profit of 12.6 billion yen a year earlier. It said weak demand meant that it won’t make a profit on mobile devices this year.

Samsung, meanwhile, confirmed the guidance that it had given earlier in July, reporting its lowest quarterly profit in two years, at 7.2 trillion won ($7.03 billion). As reported, Samsung has seen its share of the global smartphone market fall by 7 percentage points over the last year to 25.2%, as lower-cost Chinese competitors such as Huawei and Xiaomi have grabbed business in the lower and mid-range segments of the market.

As before, Samsung said it expected shipments to revive in the third quarter, as it launches a new flagship phone, the Galaxy Note 4. But the company earlier this week confirmed it was delaying the launch of a new model running its in-house Tizen operating system, which had been scheduled to pilot in Russia this month.

Fortunately for both companies, there were strong performances at other divisions to offset the problems with mobile phones. Samsung’s chip business posted a profit of $1.81 billion, but the bigger news was at Sony, which said its loss-making consumer electronics division would make a profit for the first time since 2010, after a long and painful restructuring.

Sony’s group operating profit doubled in the three months to June to 69.8 billion ($679 million), almost four times consensus forecasts, thanks to solid contributions from the PlayStation 4 and from the group’s movie division.

Sony still expects to post a net loss for its fiscal year ending March 2015, due to restructuring costs. In addition to spinning of off its TV division, the company is also moving some of its display businesses into a joint venture with Panasonic and a state-backed investment fund.

Sony’s shares closed down 1.1% in Tokyo, while Samsung’s fell by 3.7% in Seoul.