Samsung Electronics’ market capitalization dropped in June by $25.3 billion, an amount that exceeds the market capitalization of its Japanese competitor Sony, after the flagship model Galaxy S4 disappointed with sales below investors’ estimates.
Samsung shares fell 9.7% since the April 26 release date of the new top of the range smartphone, while analysts from JPMorgan Chase and Morgan Stanley banks have reduced sales and earnings estimates on the company. In June, 15 analysts have changed the forecast on Samsung’s net profit for the second quarter. Samsung shares have recorded in June a drop of 12.7%. At the current quotation, Samsung’s market capitalization is around 192 billion.
Manufacturers of premium smartphones are affected by lower demand as consumers perceive a stagnation of innovation in the industry.
“Consumers find no good reason to buy the S4 since it has no big difference with its predecessor. Chinese companies are becoming a bigger threat to Samsung than any other players,” commented Oh Sang Woo, an analyst at Seoul-based Leading Investment & Securities.
Samsung announced on May 23, 2013 that it had sold 10 million Galaxy S4 units a month after its release, reaching the 10-million threshold about two times faster than its predecessor. Two weeks later, JPMorgan and Morgan Stanley have reduced sales estimates for Samsung this year, based on changes observed in the company’s network of providers.
“Demand for high-end smartphones generally has probably slackened some. The debut prices for the iPhone 5 and for the S4 have been high in some markets. At the margin, competitors’ products have improved relative to Apple and to Samsung,” Steve Myers, an analyst in Tokyo with JI Asia Research Ltd.
Sony currently has a market capitalization of 21.7 billion dollars, but the stock of the company more than double its value this year, after the depreciation of the yen and the shift on profit for the first time in five years.
Chinese manufacturers Huawei and ZTE bet on cheaper smartphone models with technical specifications close to competitors’ specs, threatening Samsung on low cost and intermediate smartphone segments.
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