Samsung Electronics has started the year on a weak footing, as quarterly sales and operating profit forecasts disappointed expectations.

Declining memory chip prices are turning out to be a major headache for investors, clouding the outlook for 2018.

Rivals such as US-listed Western Digital are posing a growing competitive threat.

Disappointment

Samsung said it expected fourth-quarter operating profit of 15.1 trillion won ($14bn), a jump of nearly 65% compared with the prior year.

However, the estimate disappointed analysts´ forecasts, as falling memory chip prices crimp the positive revenue impact of stellar sales growth.

Samsung Electronics shares were rocked by the latest update, appearing on course to notch up another weak of losses. The stock is already down by nearly 6% this year.

Competition

Intensifying competition from the likes of SK Hynix and Western Digital has put a dampener on memory chip prices.

Shares in US-listed Western Digital have also had a rocky time of late amid the worries over falling prices. The stock has lost around 13% since the middle of November.

Western faced a similar issue to Samsung when it released its own quarterly results in the autumn. Despite beating both earnings and sales forecasts, Western shares eased as investors still struggled to find enough positive drivers in the outlook to justify what many see as a lofty valuation.

Future hopes

Western Digital is hoping strong demand for its file storage devices will help drive revenue and earnings in the future.

The company is making the area a key priority for its research and development efforts as it hopes to reap the rewards of exponential data and content growth along with demand for higher specification storage devices.

On the downside, in a blog this week the company admitted it was still facing security flaws, along with many of its rivals, as it struggles to patch affected products.

By: DocMemory
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