Galaxy S5 vs iPhone 6: Less People Using Samsung Phones; Profits Drop by 18%

Is this a sign that Apple's strategy is working?

Samsung announced on Tuesday that it has suffered an 18% drop in profits in the last quarter of the year - a first in more than two years. Instead of the expected $9.4 billion, the company only had $7.8 billion in profits for the final three month stretch last 2013, CNN reported.

The sales in the previous quarter were also lower than the three quarters that came before it. More details will emerge when Samsung finally releases its official report later this month.

Although the preliminary announcement did not include reasons for the anticipated decline, analysts speculated that the declining smartphone sales probably played a huge role in the loss, The New York Times said. Smartphone sales make up more than half of the South Korean firm's earnings.

The slowdown in sales, according to Bloomberg, may also be due to the competition coming from Chinese handset manufacturers selling devices at prices below the $100 mark. Apple's iPhone 5s and 5c may have also put a dent into Samsung's mobile phone sales, winning over more consumers to the high-end smartphone market.

The company incidentally increased expenditures on employee bonuses and perks last year, which could also have eaten up profits. However, the world's largest smartphone maker tried to offset this by boosting sales via new products, such as televisions and smartphones with curved screens and bendable displays, Bloomberg said. Nonetheless, one analyst is not impressed by Samsung's strategy.

"There isn't a real driver in the first quarter, with not many new products lined up to show solid profit," observed Seoul-based analyst Jae H. Lee of Daiwa Securities Group Inc. "The one-time costs, such as bonus payouts, were bigger than what had been estimated."

Despite the decline, the company still enjoys a one-third share in the global smartphone market. However, it needs to find effective ways to beat new challenges. Counterpoint Technology Market Research's Tom Kang has pointed this out to the New York Times.

''One by one, players in the premium price band have been squeezed out, and now it looks like Samsung may be squeezed out as well," Kang said.