Dialing Up Problems? Samsung’s Profits Plunge

Jul 7, 2014 8:05am

 

GTY samsung kab 140707 16x9 608 Dialing Up Problems? Samsungs Profits Plunge

                                       (Photo Credit: Jung Yeon-Je/AFP/Getty Images)

Morning Money Memo:

One of the business world’s biggest success stories in recent years may be set for some unhappy chapters going forward. South Korea’s Samsung Electronics is facing a third straight decline in quarterly profits. While the company remains the world’s largest seller of smartphones, profit margins for some popular brands are small. Cheaper phones manufactured by rival firms are taking a larger bite out of Samsung’s market share, especially in Asia. The website Techcrunch reports that almost one in four of Xiaomi’s handset customers in China had recently switched from a Samsung device. A Thomson Reuters poll of analysts expects a 12.6 percent drop in second-quarter earnings when Samsung reports Tuesday.

Another dose of good news for the U.S. economy helped give a lift to the stock market last week. For the first time in its 118-year history, the Dow Jones index closed above 17,000. While stock futures fell slightly this morning, last week’s surveys on jobs and manufacturing were strong. This week marks the start of quarterly earnings reports. Wall Street analysts expect that many big names will report double-digit profit gains.

Jeep is facing a challenge with the redesign of its popular Wrangler SUV. Jeep is considering a lighter body, more gears and a smaller engine to improve fuel economy, according to Automotive News. Today’s version burns a lot of gas, with just 18 mpg combined city and highway. But Wrangler’s off-road performance is a hit with loyal consumers. The trick is to combine fuel efficiency required by government standards with a vehicle that does not turn off its biggest fans.

American Apparel is reported to be in talks with a New York hedge fund to raise emergency funds. A loan became due after the board unanimously voted to fire founder and CEO Dov Charney. “Bankers are still working out the terms of the financing from Standard General,” The Wall Street Journal reports. It’s unclear what role Charney would play at the retail firm in the future.

The ballots are due by Friday in Detroit’s bankruptcy vote. Retired city workers will decide how quickly the city gets out of bankruptcy. Most retirees are being asked to take about a 4 and a half percent pension cut with no cost-of-living increases. Their pension boards are urging a “yes” vote on the plan. Voting “no,” they warn, could result in deeper pension cuts.

Richard Davies Business Correspondent ABC News Radio abcnews.com Twitter: daviesnow

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