Lagging Smartphone Division Prompts Samsung To Report First Annual Profit Decline Since 2011

After a rapid rise in the mobile market to become Apple's chief rival (and target of many lawsuits), Samsung hit a rough patch in 2014, one that will challenge the South Korean company going forward. And as expected, Samsung today confirmed its first year-on-year profit drop since 2011, even after factoring an uptick in sales in the fourth quarter.

Samsung's flagship Galaxy S5 handset is largely to blame. More precisely, Samsung's shortfall in Galaxy S5 sales isn't doing the company any favors -- after being left with unsold inventory, Samsung decided to restructure its business model, including a shakeup of high-level execs. At issue there is stiff competition from Apple's hot selling iPhone 6 models, along with a growing threat in Xiaomi and other low-cost Chinese players.

Samsung Galaxy S5
Image Source: Flickr (Kārlis Dambrāns)

Luckily for Samsung, it doesn't solely rely on the smartphone sector, though it has to figure out how to sell more devices. According to Reuters, strong memory chip demand and a focus on low- to mid-range handsets should help Samsung see a turnaround sooner than later.

In the meantime, Samsung said it expects its Q4 operating profit to be 5.2 trillion won ($4.74 billion), which is slightly higher than analysts were predicting. That should translate into a 2014 profit of 25 trillion won, the lowest in three years.