Smartphone Sales Slowing: Samsung, HTC Fall Short

Both smartphone makers Samsung and HTC  fell short of analyst expectations during their earnings call today.

Although both companies are heading in different directions, Samsung actually posted record profits year after year, while HTC is still struggling to keep pace. The overall message still underscores the recent trends: The high-end smartphone market is becoming saturated, so there’s need for new innovation and better penetration into the low-end market.

This trend, which started affecting rival Apple, is now being felt by Samsung and HTC, who together represent the three major smartphone manufacturers.

Analysts’ reactions to Samsung is similar to what Apple has been facing. These companies have such high expectations that even when they post higher numbers, analysts expect them to continue a certain pace of growth. While the HTC story is a bit different as reported by money.cnn.com:

” Samsung and HTC’s second-quarter outlooks both disappointed financial analysts, who had largely expected their latest high-end devices to launch the companies to new heights. Although Samsung’s Galaxy S4 and HTC’s One have sold well so far, neither company met analysts’ forecasts for sales or profit.

That’s particularly troubling since several smartphone-industry forecasts have indicated that interest in Samsung and HTC’s best smartphones has likely peaked. Shares of Samsung fell 4 percent on Friday, while HTC’s shares rose 1 percent.

South Korea-based Samsung said it would report an operating profit of $8.1 billion to $8.5 billion for the three months ending in June — which works out to a minimum increase of 44 percent over the same period last year. Sales were also higher than last year, rising a minimum of 18 percent to around $50 billion.

That marked the company’s best-ever earnings guidance for the second quarter — but it still fell short of analysts’ expectations. Though analysts say HTC’s One has sold admirably, it didn’t stop HTC from continuing its downward spiral. The Taiwanese company said its second-quarter profit would come in at around $42 million-down 83 percent from a year earlier. HTC’s reported sales would be $2.35 billion, down 22 percent.”

This is troubling news for Samsung, HTC and Apple, with fears that the best days are behind them with smartphones. However, this is probably Wall Street’s natural overreaction to news. Wall Street typically follows the type of mood swings of a 6 -year-old child-when things are good, they are incredibly optimistic and nothing can go wrong. Then at the  first sign of any change, “the sky is falling” mentality sets in.

The truth is probably that while high-end smartphone sales are slowing, there is still significant room for penetration throughout the world.

Additionally, there is significant room for new innovation in tech-including wearable tech like Apple’s rumored iWatch or Google’s Glass.