Samsung's Galaxy S5 comes crashing down to Earth
Hammered by falling smartphone profits, Samsung is reportedly eyeing major changes for its senior leadership.
Samsung's sales for its flagship Galaxy S5 smartphone came in well below expectations, moving 12 million units compared to 16 million for the Galaxy S4. So far, the Galaxy S5 has sold 40% fewer units than the company had anticipated. The shortfall was especially pronounced in non-U.S. markets and the company is scrambling to sell inventory that languished in warehouses, according to a report from The Wall Street Journal.
The report adds that J.K. Shin, the head of Samsung's mobile business, could be replaced or see his responsibilities shifted to another area.
Samsung employs a peculiar three-CEO structure, with Shin alongside B.K. Yoon (head of television and home appliances) and Kwon Oh-hyun (semiconductors and displays). Kwon had previously served as the lone CEO, with Yoon and and Shin added in March 2013.
While nothing is set in stone, the report of a possible shakeup underscores Samsung's recent struggles in the lucrative smartphone market. The company recently announced that it would be cutting the number of smartphone models produced by the company by as much as 33% in an effort to compete in China, where price competition has increased.
The South Korean company recently reported third-quarter earnings that declined 60% compared to the same period in 2013, noting that competition from both the high end of the market (competitors like Apple) and the low end (China's Xiaomi) had put a squeeze on the company.
Samsung remains the biggest smartphone maker in the world, with 24% of the global market — almost twice that of Apple. This position is part of the reason for Samsung's recent struggles.
Roger Entner, telecom analyst and founder of Recon Analytics, said that Samsung continued to set growth goals that had previously been attainable but were now unrealistic. The company, he noted, had become too big of a player in the smartphone market to meet its forecasts.
"That hyper growth, when you're the challenger, is gone," Entner said. "It's much harder to expand market share than when you were the also ran with 10%."
Entner said Samsung's expectations had not been tempered by its new market position, and that executives may have to pay the price for the gap between its sales and its ambitions.
"I think they're falling victim of their own expectations," he said. "Samsung has a very tough culture where working hard and success are expected and anything less than perfection gets pretty harshly punished. I think that's what we're seeing here."
Samsung did not respond to requests for comment.