Samsung Fires Several High-Ranking Mobile Execs After Year Of Down Phone Sales

After a year of disappointing smartphone sales, Samsung has fired several of its high-ranking mobile executives, including vice presidents, senior vice presidents and executive vice presidents, according to a report from The Wall Street Journal.

The report states that it is unclear which of the dozens of executives who lost their jobs were removed from the company permanently and how many might be reassigned. Despite the flurry of firings, one big-name Samsung executive whose job is still safe for the time being is Chief Executive and head of Samsung mobile operations, J.K. Shin.

"It's absolutely a response to how the profits are coming back to earth," said Jack Narcotta, industry analyst for Technology Business Research. "The fact J.K. Shin somehow avoided it is a little surprising to me, but given that he's likely executing on the strategy that's been drawn out for him, it might have been too big of a leap to fire him."

[Related: Samsung To Cut One-Third Of Smartphone Models After Profit Continues To Plunge]

At this point last year, Samsung had a stranglehold on the worldwide smartphone market with 32.5 percent market share, but has dropped to 23.8 percent in the past year, according to IDC. During this time, the rest of the market grew by 41 percent.

"It sounds like Samsung is pulling the trigger and they are reacting quickly," said Douglas Grosfield, president and CEO of Xylotek Solutions, a Cambridge, Ontario-based solution provider. "I certainly didn't find it surprising. The danger of having a position like that is the buck stops there. The responsibility lies with the upper executives to create and execute on the vision of the company," he said.

"You have to be successful or changes will be made," Grosfield added. "This year, Samsung has had declining sales and declining market share. They’ve had a few misses on the smartphone models they’ve released, and they haven’t done as well as they projected. Samsung is well-advised to make changes quickly and in business, they say you have to learn or fail quickly. It's a reprieve for Shin, who's been given a chance to go at it again and rebuild the team and execute on the company's vision, and he'll be given some time to do so. It'll be interesting to see what he does going forward."

Samsung is still the leader in the smartphone space by a large margin, but the profit numbers have significantly declined during a year of slower smartphone sales.

In late October, Samsung announced its lowest third-quarter profit in almost three years as it dropped nearly 50 percent. This comes after reporting a 20 percent drop three months earlier. During that same second-quarter earnings call, the company acknowledged disappointing Galaxy S5 sales numbers after its flagship phone's release in April.

Next: Galaxy S5 Disappointment Led To Firings

"The firings and reassignments at Samsung are in reaction to the lukewarm reception of the Galaxy S5, their flagship phone," said Patrick Moorhead, president and principal Analyst of Moor Insights & Strategy, a leading tech analyst firm based in Austin, Texas.

"Samsung overestimated demand because they misjudged the consumer response to what Samsung considered differentiators," Moorhead said. "Features like heart rate sensors, high MP cameras, eight cores and fingerprint scanners just weren't received as positively as they expected," he said. "With the S5, Samsung just didn't have the level of differentiation they once had. Also, in some countries, they used their own Exynos silicon, which, when benchmarked versus silicon from Apple, Qualcomm or Nvidia, it got squashed."

While Samsung continues to battle Apple in developed markets, it's in the entry-level markets that Samsung is seeing its biggest losses, experts said. The rapid, growing success of Chinese vendors such as Lenovo, Xiaomi and Huawei and their local Chinese market, the largest smartphone market in the world, is something experts said Samsung wasn't properly prepared for and, thus, has put a dent in the company's mobile business.

Just two weeks ago, the manufacturer of the Galaxy line announced plans to ax up to a third of its smartphone models in order to compete with the competitive price points of Chinese vendors.

"The large success in the smartphone industry is in the low end. That’s where Lenovo, Xiaomi and Huawei are hurting Samsung," said Technology Business Research's Narcotta. "The vast majority of phones in that price range are really good at what they do."

Narcotta added, "The allure of the Samsung brand isn't living up to the price level when the competition is so much more price-competitive. I think the product mix over the last two or three quarters is more of a volume-based play and, therefore, returns less profit per unit. They weren't prepared for the shift. When you are that large of a company, it is very difficult to turn on a dime, and that's what they are doing now. They didn't see the end of the runway coming, and now they are over the cliff."

Samsung did not respond to CRN's request for comment.

PUBLISHED DEC. 4, 2014