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MarketScreener Homepage  >  Equities  >  KOREA EXCHANGE  >  Samsung Electronics Co Ltd    005930   KR7005930003

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Samsung Electronics : Plays It Safe With New Note Smartphone -- WSJ

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08/10/2018 | 02:48am EST

By Timothy W. Martin

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 10, 2018).

NEW YORK -- Samsung Electronics Co.'s newest flagship device unveiled Thursday looks much like last year's model, reflecting slowing innovation in smartphones that has contributed to a historic dip in industry sales.

The world's biggest smartphone maker introduced the Galaxy Note 9 at Brooklyn's Barclays Center about two weeks earlier in the year than its predecessor was revealed in 2017 -- a bid to bolster plummeting phone sales before rival Apple Inc.'s expected release of its fresh lineup of iPhones next month.

But the South Korean giant did little to dim a perception -- both inside and outside the firm -- that its releases this year aren't pushing the envelope enough to keep pace with rivals, including lower-cost Chinese brands that are pressing forward with a raft of flashier features.

Samsung's mobile chief, D.J. Koh, said in an interview that the company had taken a more cautious approach to radical new technologies in the aftermath of the global recall two years ago of Galaxy Note 7 devices due to overheating batteries. He said he had strongly emphasized quality to employees along with innovation.

"At the time, I thought that was the right decision, the right direction, " he said. But now, he said, he believes the company should have moved "more vigorously."

In prior years, the Galaxy Note series won fans by pushing the limit on new features, some of which were later offered by Apple. Seven years ago, the Galaxy Note was the first mainstream plus-size phone, and a variant of 2014's Galaxy Note 4 was the first to have a curved screen. Two years ago, Samsung added an iris scanner that could unlock the phone.

This year, the Galaxy Note 9's biggest technological leap may be the S Pen stylus. It's now Bluetooth-enabled, meaning users can execute certain commands while standing as far as 30 feet from their phones. The stylus, when inserted back into the phone, fully recharges within 40 seconds.

Mr. Koh likened the Galaxy Note 9 to a swimming swan.

"It looks quite peaceful," said Mr. Koh, referring to the device's lack of dramatic visual changes. "But underneath the water, the swan's feet are moving quickly."

Samsung has revved up the horsepower of the flagship phone: Battery life and power are 20% greater, storage memory in base models has been doubled, and the device's edge-to-edge Infinity display has been slightly enlarged to 6.4 inches from 6.3 inches.

The smartphone industry, as it rounds into its second decade, has fallen into an unprecedented sales slide, as consumers hold onto devices longer and many buyers bristle at prices approaching $1,000.

Samsung has been deeply affected. Its smartphone shipments plummeted to 71.5 million units for the quarter ended in June, a 10% drop from the prior year, according to Strategy Analytics, a market researcher. Meanwhile, Chinese rivals like Huawei Technologies Co. and Xiaomi Corp. saw big boosts in unit sales, and Apple has proved resilient in the high-end market.

A big driver of the drop was weak sales of Samsung's primary Galaxy S9 phone, which analysts say could see a sales falloff of 20% or more from the previous year's model.

Mr. Koh said the Galaxy S9's performance was rebounding, boosted by sales to businesses and large employers. Business-to-business sales make up 10% to 15% of overall shipments, and Mr. Koh hopes to double those figures by 2020.

The Galaxy Note 9, typically the company's most feature-rich device and one that caters to a niche audience, will be a tough sell to consumers, especially those who aren't already using an older version of the phone, said Wayne Lam, a principal analyst at research firm IHS Markit. "Consumers just won't pay more for just incremental updates because they may as well buy last year's model," Mr. Lam said. "There's not much different with the Note 9."

Samsung said the base model of the Galaxy Note 9, with 128 gigabytes of memory, would be priced at $999.99 in the U.S., and a 512-gigabyte version would cost $1,249.99. Last year, the base model of the Galaxy Note 8 was priced at around $950.

In a recent research note, Susquehanna analyst Mehdi Hosseini said he expects Galaxy Note 9 shipments of just 5 million devices this year, compared with the Galaxy Note 8's sales of about 12 million units last year.

Preorders for the Galaxy Note 9 start Friday. In the U.S., the devices will hit shelves on Aug. 24, weeks earlier than the prior-year model which became available in mid-September.

For Samsung's mobile division, 2019 is shaping up to be a critical year, with the release of the 10th Samsung Galaxy S device next spring. Samsung is also planning to introduce a foldable-screen smartphone early next year, a device that features a screen roughly the size of a smaller tablet that can be folded in half, like a wallet, The Wall Street Journal reported last month.

At the Barclays Center event, Samsung showed off its long-awaited Bixby-powered speaker. The speaker, called the Galaxy Home, features a legged bottom and looks like a stemless wine glass. It can steer sound in the direction of the person providing verbal commands. The Journal reported last month on the speaker's design and a debut this month.

Mr. Koh said during his interview that the speaker might not be released until early next year. The original target was to start selling the Bixby-powered speaker in September, though he pulled back after learning how important top-notch sound quality was to customers -- even more than the device's voice intelligence features.

More details about the speaker will come out in November, when Samsung holds its annual developers' conference in San Francisco, Mr. Koh said.

A key selling point for the speaker will be a long-term partnership Samsung struck with music-streaming giant Spotify Technology SA. Spotify will be the default music-streaming service across a range of Samsung products, from the Galaxy Home to televisions and smartphones.

News of the partnership sent Spotify shares up about 4% in mid-day Thursday trading.

Write to Timothy W. Martin at timothy.martin@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
SAMSUNG ELECTRONICS CO LTD (ADR) 1.66% 920.5 Delayed Quote.0.00%
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Financials (KRW)
Sales 2018 246 656 B
EBIT 2018 60 997 B
Net income 2018 45 247 B
Finance 2018 81 842 B
Yield 2018 3,57%
P/E ratio 2018 6,00
P/E ratio 2019 7,58
EV / Sales 2018 0,75x
EV / Sales 2019 0,70x
Capitalization 266 286 B
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 40
Average target price 52 738  KRW
Spread / Average Target 32%
EPS Revisions
Hyun-Suk Kim Co-President, Co-CEO & Director
Dongjin Koh Co-President, Co-CEO & Director
Kinam Kim President, Co-CEO & Director
Tae Moon Roh Co-President & Head-Research & Development
Hee-Chan Roh Chief Financial Officer
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