Samsung expects fourth-quarter profit to drop 37 percent from year ago

Samsung put a lot of emphasis on its Note 4 in the fourth quarter.CNET

Samsung Electronics said Wednesday that it expects its fourth-quarter earnings report to show a decline in operating profit, as the company grapples with increased competition in its core smartphone business.

The South Korean electronics giant estimates its operating profit for the quarter will be 5.2 trillion won ($4.7 billion), a drop of about 37 percent from the year-ago period. The guidance, released today ahead of full earnings later this month, slightly tops the 4.8 trillion-won average of 36 analyst estimates compiled by Bloomberg.

Samsung also estimates that its sales for the quarter likely fell about 12 percent year over year, to 52 trillion won ($47 billion).

The prediction means the company expects to report its fifth consecutive quarter of declining operating profit after a string of five consecutive quarters of record profits. Analysts had been expecting modest earnings results from Samsung, the world's largest vendor of smartphones, after profits from its mobile business tumbled some 74 percent in the third quarter from a year earlier.

Samsung smartphone shipments, which typically account for two-thirds of the company's operating profit, are being squeezed in emerging markets by low-cost handset vendors such as Xiaomi and Huawei. The company is also facing stiff competition from Apple in the market for pricey, high-end smartphones, especially since Apple in September launched two bigger-screen iPhones that now compete with Samsung's large-screen offerings.

Though market-share numbers for the fourth quarter are not yet available, Samsung's share of the global smartphone market in the third quarter shrank from 32.1 percent to 24.4 percent year over year, research firm Gartner reported last month. Apple came in third, followed by China-based smartphone makers Huawei and Xiaomi.

The sales slump led Samsung to reduce the number of smartphone models it produces and focus instead on a core set of devices. Samsung's head of investor relations, Robert Yi, told investors in November that his company plans to cut the number of smartphone models it produces in 2015 by 25 percent to 30 percent.