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Samsung repositions mobile division staff amid lackluster earnings

All Headlines 09:56 September 18, 2014

By Kang Yoon-seung

SEOUL, Sept. 18 (Yonhap) -- South Korean tech giant Samsung Electronics Co. began reshuffling some 700 employees from its mainstay mobile division to other business sectors, inside sources said Thursday, a move that coincides with weakened earnings and belt-tightening measures.

According to the sources with close knowledge of the matter, the company plans to relocate the workers from its Suwon and Gumi facilities, outside of Seoul, to other business divisions under Samsung Electronics.

"The relocation process already began last week, and the number (of staff involved) is estimated at 700," one of the sources said, wishing to remain anonymous. "Many of the workers are being reassigned to the network, video display, and software divisions."

While the company is said to have told the employees that the reshuffle is meant to bolster its smart home business by sending mobile specialists to all divisions, the sources and industry watchers say it is more likely linked to falling revenue at the mobile division, which has come under increasing challenges from the maturing global market and overseas competition.

Earlier this year, Samsung Electronics reassigned 150 to 200 staff members from its head office, relocating them from finance, human resources, and public relations to sectors such as sales and production management.

Since then, rumors have been flying that there may be layoffs at the mobile division, which Samsung scoffed at as "groundless," only to add, "rather, the company will have to expand its workforce to overcome its slump."

Reflecting the challenges it faces, however, sources said Samsung launched belt-tightening measures earlier this year to reduce even trivial costs amid its earnings slump. Executives traveling on business trips have been told to use economy-class seats for flights under 10 hours, and their travel budget was also reduced by 20 percent, according to the sources.

Workers were also encouraged to use their vacation days to cut costs for the company, and managers have to give prior approval for employees to work overtime, they said.

Samsung Electronics' net income came to 6.25 trillion won (US$6.03 billion) in the April-June period, down 19.5 percent from the 7.77 trillion won a year earlier.

Earnings from its IT and mobile business division, the company's main revenue source, fell 29.6 percent on-year to 4.42 trillion won in the second quarter from 6.28 trillion won a year earlier.

The tech mammoth soon will begin sales of its new 5.7-inch Galaxy Note 4 phablet, but the launch has been somewhat overshadowed by its U.S. rival, Apple Inc., which released its 5.5-inch iPhone 6 Plus, encroaching on the bigger screen sector that had so far been dominated by Samsung's Galaxy lineup.

Analysts also say Chinese players are eroding Samsung's market share as they rapidly narrow the gap with traditional leaders in the low-end sector.

South Korea's 27 brokerage houses estimated Samsung's operating profit for the July-September period at an average of 6.98 trillion won, far below the 8.6 trillion won outlook made in July, the data compiled by FnGuide showed.

"There is a limit to the expansion of Samsung Electronics' earnings due to the rising competition in each division," said Nam Dae-jun, an analyst at Hana Daetoo Securities Co. in his report on Samsung's earnings outlook.

"If Samsung is to overcome the challenge, it must foster a new growth engine, or expand the competitiveness of the current mainstay arm," Nam added.


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