– Next big thing? –
Many see wearable devices – such as Google Glass – as the “next big thing”. IT research and advisory specialists Gartner Inc. predicts wearable technology will emerge as a $10 billion dollar industry by as early as 2016.
Samsung’s first Internet-enabled smartwatch, introduced last September, was given a lukewarm reception by consumers who disliked its chunky design. A second edition, the Gear 2, was launched in February.
“I believe the next big thing will be Internet of Things (IOT) in which all household appliances, electronic devices and even cars are connected through the network,” said Lee.
“And the first step towards the era of the IOT is wearable devices,” he added.
Samsung Electronics certainly has the financial clout to invest heavily in new technologies with a net cash balance of more than $50 billion.
At a rare analysts’ briefing in November last year, president and chief financial officer Lee Sang-Hoon said the reserves would be used to fund significant investment in research and development.
“It’s way too much of an exaggeration to say it’s all downhill from here,” said Suh Won-Seok, an analyst at Korea Investment and Securities.
“Given its economies of scale and relations with mobile carriers around the world, I believe it can maintain the 10 percent margin it needs to prevent any dramatic profit decline,” he said.
Samsung is already making margin concessions with the S5, launching it at a slightly lower price than its predecessor the S4 and throwing in a premium software bundle estimated at more than $500.
Nevertheless, Greg Roh at HMC Investment and Securities said they had had cut their forecast for Galaxy S5 shipments for the year to 44 million, from the previous estimate of 46 million.
“We also slashed our forecast for Samsung’s second-quarter sales and operating profits by 1.5 percent and 2.7 percent, respectively,” Roh said.
“It’s true that Samsung is good at producing profits despite slowing smartphone growth, but for now it looks inevitable that the operating profit falls this year,” he added.
Adding to Samsung’s headaches is a continuing series of patent-focused legal battles with arch-rival Apple.
A fresh trial opened in the United States earlier this month, with Apple vowing to prove that Samsung flagrantly copied iPhone features and should pay more than $2 billion in damages.