Samsung Electronics warns on growth expectations as it forecasts 60% fall in quarterly profit (it could have been worse frankly, probably will get worse). Guess who’s been short $EWY as a way to short Samsung in the US and predicting the downfall of Samsung? That’s right, we have.
Details include specifics that are exactly what we’d expected when we first put on our short EWY South Korean ETF to get exposure to Samsung’s peak and now, subsequent fall. “The world’s biggest mobile phones and TV maker said it expects an operating income of 4.1tn won ($3.8bn; £2.5bn) for the three months to September. That is below analysts’ expectations for earnings of 5.2tn won. Samsung’s mobile division, its biggest business, has been struggling to maintain its dominance against rivals such as $AAPL and Chinese smartphone-makers Xiaomi and Lenovo.”
As I wrote back in January 2013, “Samsung’s products, especially the Galaxy S III, have been selling like gangbusters, but not all reviews I’ve read are stellar. At some point, it’s inevitable. The Samsung wave too will crash. Hard. And the risk to a manufacturer like Samsung is that when that tide changes, its margins can plummet. Do you have a Samsung ecosystem? Or an Android ecosystem? Isn’t Google the platform play that I preach about so much. Platforms create revolutions. Revolutions make great investments. Hardware vendors with nothing to lock you in to their brand do not create revolutions.”
I’d also explained at the time that Samsung was “riding a wave of popularity and sales that’s reminiscent of Nokia in 2008. Or of Motorola in the Razr heydays. Or of Research In Motion when everybody wanted a BlackBerry. But wait a minute. How’s Nokia doing today? Or RIM? Google swooped in to play white knight for Motorola last year — for a fraction of the price the company was valued at in its Razr prime, and it remains to be seen how quickly (if?) the handset manufacturer can be turned around.”
So here we are and I hate to say because South Korea’s economy needs the earnings from Samsung, but I do think Samsung’s future is playing out exactly like the Motorola, Blackberry, Nokia cycle’s did as they fell from dominant to single digit marketshare over the years after they peaked. Thusly, I want to remain short the EWY and would look to build up short positions in the EWY and/or buy some long-dated puts on EWY.
