Jan 25, 2013 by Simon Mundy
Relations between Samsung and Apple reached a low point last year as they squared off in intellectual property disputes on four continents.
But this week gave the rivals something to bond over: each company reported strong growth in smartphone sales, only to watch investors rush for the exit.
Apple suffered by far the steepest share price decline of the two, losing a tenth of its market capitalisation on Wednesday after reporting unexpectedly weak bottom line growth in the last three months of 2012. It sold 47.8m iPhones in the period, up by 78 per cent year-on-year, but this was lower than expectations, suggesting disappointing sales of the new iPhone 5. Revenue growth of 18 per cent was far lower than levels in recent years.
By comparison, Samsung’s performance in the period was impressive. Moderated by slow-growing divisions like the television business, its top-line expansion was also 18 per cent. But its smartphone business continued to roar ahead, with sales up by more than half, year-on-year.
Despite this revenue growth – and a near-doubling of operating profit – Samsung’s shares slipped 2.5 per cent after it warned of a likely slowdown in the first quarter of this year. Smartphone markets in the developed world are approaching saturation point, and the group is encountering increasingly fierce price competition from low-cost Chinese rivals, who are eroding its market share in China and could threaten its prospects elsewhere.
It was a mark of Samsung’s nervous outlook that it broke from its normal practice of giving a numerical target for capital expenditure for the year, saying only that it would be similar to last year’s, and would respond to “the market’s ebb and flow”.
Some might expect Samsung to take comfort in Apple’s pounding by investors. But trouble at the US group could become a problem for Samsung, notes one insider at the South Korean company. If Apple turns to price cuts to boost iPhone sales, the price war that could result would have an impact on both groups’ margins.
Related reading:
Samsung warns on smartphones slowdown, FT
Apple falls victim to its own success, FT
Apple suppliers: already moving on, beyondbrics
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