Samsung: Fluffed lines

THE last 51 weeks of 2014 will be better than the first one. Or so Samsung’s bosses will hope after two toe-curlers in as many days. On January 6th, at the Consumer Electronics Show (CES), a trade fair in Las Vegas, Michael Bay, director of the “Transformer” films, was due to extol a new Samsung television with a 105-inch curved screen. Alas, the autocue froze—as did Mr Bay, who walked off the stage. The next day Samsung Electronics, the part of the South Korean conglomerate that makes mobile devices, consumer electronics, semiconductors and display panels, admitted that in the last quarter of 2013 it had fallen far short of analysts’ forecasts.

Samsung Electronics’ operating profit in the fourth quarter fell for the first time in more than two years, to about 8.3 trillion won ($7.8 billion), 18% less than in the third. Analysts had hoped for 10 trillion won or more. Revenue was around 59 trillion won, flat from the third quarter. Rumours of a miss had already cropped 9% from the share price since December 23rd.

Unlike the autocue, Samsung Electronics has not gone phut. The full results are due later this month, and the company is giving no more details yet, but most of the shortfall can probably be ascribed to temporary factors. Samsung Electronics has handed maybe 800 billion won to its staff in a special bonus. Mark Newman of Sanford C. Bernstein, a research firm, reckons that the strength of the won, which is at a four-year (trade-weighted) high, accounts for another 700 billion won.

Mr Newman adds that in the second and third quarters Samsung Electronics—which sells more smartphones than anyone else—shipped more devices than operators could shift, leaving them with bigger inventories than usual. So Samsung probably shipped fewer to them in the fourth quarter. But over the whole year, shipments grew by half and Samsung won market share from Apple at the pricier end of the market. “Operating profits were up substantially, too,” Mr Newman says; “just the timing was different.”

A more niggling worry is that the company is starting to find the market for mobile devices harder work. IDC, another research firm, expects smartphone shipments to grow by 18.4% a year between 2013 and 2017. That sounds dandy for Samsung, but the fastest growth is in cheaper phones, where competition is getting fiercer and margins thinner. Dozens of Chinese companies are making cheap devices that are improving all the time. IDC predicts that average prices will fall by 7.3% a year.

However, given Samsung’s sheer scale and the range of its phones at all prices, it is probably as well placed as anybody. Analysts at Nomura, a bank, point out that although cheaper smartphones command lower margins than dearer ones, they are at least more profitable than basic “builder’s phones”. And the margins on Samsung’s tablets (a faster-growing market than smartphones) are rising.

Breadth was, in effect, Samsung’s pitch at CES. As well as its gargantuan TVs it showed off new tablets, washing machines and more—and a platform called Smart Home, on which all manner of appliances could be controlled from inside or outside the home. The connected home has been a technologists’ dream for years: the industry is about to find out how many people want it in reality. Mr Bay may have been lost for words, but Samsung is not lost for ideas—nor for money.