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(LEAD) Galaxy Notes not game changers for Samsung: analysts

2014/09/04 15:48

By Kang Yoon-seung

SEOUL, Sept. 4 (Yonhap) -- The latest smart devices presented by Samsung Electronics Co. overnight don't appear to provide the much-needed jolt to the firm's ailing handset business, analysts said Thursday, citing the new models' features as both cliche and too adventurous.

The views followed the introduction of the Galaxy Note 4 by the world's No. 1 smartphone maker, the latest of its smartphone-tablet PC lineup, in Germany on Wednesday. The new flagship model came with bolstered features, including its stylus pen functions, and with a twin version, the Galaxy Note Edge, which adopted a curved screen.

"Changes to the Galaxy Note 4, despite improved features compared to the older sisters in terms of hardware, did not surprise the market's earlier expectations," said Ryan Hong, an analyst from LIG Investment & Securities Co.

"Some features, including the metal-based frames, had already been adopted by rivals, making it hard for Samsung to differentiate itself from others," Hong added. "While the Galaxy Note Edge did manage to distinguish itself, it is unlikely the product will be mass-produced due to technological difficulties."

   While Samsung said the most significant improvement lies in the S pen, which has doubled the sensitivity of previous models, providing users with a more realistic writing experience, industry watchers doubted whether consumers will cheer such changes.

Park Young-joo, an analyst from Hyundai Securities Co., projected that the sales estimate for the Galaxy Note 4 will not exceed that of its older predecessor launched last year.

"The estimated shipment of the Galaxy Note 4 is 1.5 million units in the third quarter, 9.5 million units in the fourth, with the combined amount reaching 11 million units by the end of the year," Park said. "The amount is similar to that of the Galaxy Note 3."

   "As for the Galaxy Note Edge, the shipment will only reach 1 million by end-December, as its manufacturing process is expected to be complicated," he said. "While the two models will slowly contribute to revitalizing the smartphone sector, it will not be enough to fix the problem."

   Yoo Eui-hyung, an analyst from Dongbu Securities Co., said the new smartphones were not "wow factors," noting that the curved screens on the Galaxy Note Edge were already implied during the Consumer Electronics Show held earlier this year in the United States.

"The touch screen on the edge does not work smoothly, and it will take some time for users to get used to the Galaxy Note Edge," Yoo said. Users may well have difficulty adapting, which contradicts the model's effort to strengthen convenience, he said.

Industry watchers have been lowering third-quarter earnings estimates for the tech mammoth whose mainstay handset business has been stunted from increased competition and a maturing global market. Samsung Electronics' net income came to 6.25 trillion won (US$6.13 billion) in the April-June period, compared with 7.77 trillion won a year earlier.

Its earnings from its IT and mobile business division, the company's main revenue source, fell 29.6 percent on-year to 4.42 trillion won in the second quarter from 6.28 trillion won a year earlier.

Analysts say the two new Note models will limit earnings for the remaining 2014, as the company's marketing costs are anticipated to rise while it also has to offload inventories of the Galaxy S5 and tablet PCs.

The release of Apple Inc.'s new iPhone slated for later this year will also weaken demand for Samsung's high-end devices, analysts say.

The Galaxy Note Edge, which adopted curved displays on the edge to show text messages while the main screen is engaged, could support Samsung's efforts to expand lineups with flexible displays, which has been one of the industry's main focuses this year, they note.

"Samsung is expected to take the lead in the flexible display market, which can be utilized to differentiate its smartphone from other rivals," said Lee Jeong, an analyst from Eugene Securities Co.

Samsung Electronics Co. introduced the Samsung Gear VR, a virtual reality headset that allows users to enjoy 3-D contents, on Sept. 3, 2014. (Yonhap) Samsung Electronics Co. introduced the Samsung Gear VR, a virtual reality headset that allows users to enjoy 3-D contents, on Sept. 3, 2014. (Yonhap)

The Samsung Gear VR and the Samsung Gear S, also introduced along with the Galaxy Note lineup, are significant in that they reflect Samsung's struggle to find new business opportunities that can deliver innovative experiences to users.

The Samsung Gear VR is a virtual reality headset that allows users to enjoy 3-D contents linked to the Galaxy Note 4 smartphone, a new foray for the company.

The Samsung Gear S comes with its own universal subscriber identity module (USIM) card so that users can make phone calls without being linked to a smartphone. This is a distinctively differentiated feature from previous wearables that needed smartphone connection for calls.

Shares of Samsung Electronics edged up 1.77 percent to 1,210,000 won on the main bourse Thursday when the KOSPI moved up 0.25 percent.

The shares fell below 1,200,000 won for the first time in two years on Tuesday amid the gloomy third-quarter outlook. Their peak price was 1,584,000 won set on Jan. 3, 2013.



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