Samsung is doing its best Michael Bay impression with its latest earnings estimates.

For the first time in nine quarters, the company posted its first decline in profits. Samsung reported earnings of $7.8 billion in the fourth quarter, lower than the $9.56 billion it reported in the third quarter of last year. That’s also down from the $8.27 billion it reported at the same time in 2012.

Samsung’s numbers come via its earnings guidance for the quarter, which it’s posting a few weeks ahead of its official audited report. We won’t know the full picture until Jan. 24th.

Still, most analysts say they already have a good idea of what caused at least part of Samsung’s decline: Smartphones, or, more specifically, smartphone competition.

While Samsung commands a third of the world’s smartphone sales, the smartphone market has become an increasingly tough one to navigate. On the high-end is Apple, and on the low end are Chinese smartphone companies, who are making Samsung-quality smartphones cheaper than Samsung can make them.

This puts Samsung in a bad position. While increasing the prices of its phones would beef up its profits, that would also cut down on sales as consumers go for cheaper devices. The company is similarly stuck on the high-end, where competing with Apple (and everyone else) prevents Samsung from cutting smartphone manufacturing prices by using cheaper components.

Still, Samsung could be doing a lot worse for itself. While $7.8 billion is a bit low compared to what the company’s pulled in previously, Samsung is still in a much stronger position than, say, HTC, which had a $10 million profit last quarter.

Perspective always helps.


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