Samsung has released the second quarter profits report, which has clearly missed the estimates made by the market experts about the world’s biggest phone maker. Samsung is facing immense competition in the market because of the Chinese competitors like Xiaomi and Apple Inc (NASDAQ:AAPL), its all-time rival which is about to launch the iPhone 6. In a program on Bloomberg, Schroder Investment Management’s James Gautrey said that there are a number of reasons why Samsung is lagging, Chinese competitors, and Apple Inc (NASDAQ:AAPL) iPhone 6 is some of them. Answering the question about how Chinese competitors are taking on Samsung and why Samsung didn’t make good estimates about their Chinese rivals, Gautrey said that Samsung is facing problems in innovation.
“It’s difficult to keep innovating at the pace that you require, if you are gonna consistently make certain normal profit margins, you know Samsung has been enjoying up net 20% operating margins for few years,” said Gautrey.
Apple Inc (NASDAQ:AAPL) is clearly ahead of Samsung in the market now. Samsung’s operating profit has fallen by 24% in the second quarter and its sales have shrunk by 9.5%
Gautrey said the upcoming decade can be a rerun of the last decade where Nokia was ruined because of its low sales and less innovation. Answering the question about how Samsung can compete the ecosystem of Apple Inc (NASDAQ:AAPL), Gautrey said that it is quite difficult for Samsung now to compete with Apple in the market because Samsung lacks the software ecosystem.
“Samsung strength has been in sort of following fast, manufacturing very very well, putting their fingers in lots of different pies, and they’ve made very very consistent money in handsets for well over a decade now, so I think they’d do just more of the same, and I think that entails lower profit margins than they enjoyed in the last few years, but chances of them reinventing themselves to become an Apple Inc (NASDAQ:AAPL) software ecosystem, I don’t think it’s there really,” said Gautrey.