Samsung Forecasts Greater Earnings Decline Than Expected for the End of 2013

TOKYO — Samsung Electronics, the world’s biggest maker of smartphones, said Tuesday that its earnings in the last quarter of 2013 fell from the previous three-month period as well as from the same period a year ago, heightening investors’ concerns about competitive pressures in the industry.

As usual, the company, based in South Korea, released only a bare-bones forecast of its quarterly earnings, in advance of a full report later in the month, and provided no reasons for the expected decline in operating income. Analysts have said the company faced tighter profit margins on smartphones, along with higher employee bonus costs, during the quarter.

While the drop was expected, the earnings forecast was below analysts’ estimates. The company predicted operating income of about 8.3 trillion won ($7.8 billion) for the final three months of the year, down from 10.2 trillion won in the third quarter. In the fourth quarter of 2012, the company had  8.84 trillion won in operating income.

Revenue is expected to total about 59 trillion won, roughly even with the third quarter.

While Samsung controls more than one-third of the global smartphone market, it faces renewed competition from Apple, which recently added leading network operators like China Mobile and NTT DoCoMo of Japan to its roster of iPhone vendors.

Samsung also faces increased competition from low-cost manufacturers in China, some of which hope to challenge Samsung and Apple in developed markets.

Analysts say Samsung’s costs in the fourth quarter were lifted by a special bonus to some employees to mark the 20th anniversary of what the company calls its new management initiative. In 1993, the Samsung group patriarch, Lee Kun-hee, began a drive to raise the quality of the company’s products, telling managers to “change everything except your wife and children.”

Samsung will issue a detailed earnings report on Jan. 24.

No wonder Samsung Electronics is so busy looking for a new hit gadget. Its signature product, the smartphone, is facing unanticipated challenges.

Samsung, the world’s largest maker of smartphones, said Tuesday that its operating profit in the fourth quarter had declined from the third quarter of  2013, and also compared with the fourth  quarter of 2012. 

As usual, the company, based in  Suwon, South Korea, released only a bare-bones forecast in advance of a full quarterly earnings report later in the month. It provided no reasons for the expected decline. But analysts said softness in smartphones, which account for more than half of Samsung’s earnings, was probably a big reason.

Samsung still has a roughly one-third share of global smartphone sales, but it faces new challenges to its dominance. At the low end, a number of Chinese companies are offering phones with similar features at a lower price. More worrying for investors are new signs of vulnerability in premium-price phones, which account for the vast majority of the profit in the business. 

For several years, Samsung and Apple have been battling for leadership in high-end phones. Now Apple is making new gains. In November, it sold 65 percent of the smartphones priced at $400 or more worldwide, up from 35 percent a year earlier, according to Counterpoint Technology Market Research.  And that was before Apple added China  Mobile, the world’s largest network operator, as an iPhone partner, with sales set to begin this month.

In the same period, Samsung’s share of the premium market fell to 21 percent from 40 percent, according to Counterpoint.

‘‘One by one, players in the premium  price band have been squeezed out, and now it looks like Samsung may be  squeezed out as well,’’ said Tom Kang, an analyst at Counterpoint.

A year ago, Samsung had two strong entrants in this category, the Galaxy S3  smartphone and the Note 2, a so-called  phablet, or cross between a phone and a  tablet computer. But the current flagship smartphone, the Galaxy S4, has been a relative disappointment, leaving a new phablet, the Note 3, to carry the load.