Samsung Replaces Design Executive as Phone Sales Stall

Samsung Electronics Co. (005930) replaced the leader of its mobile-device design team as the world’s largest smartphone maker struggles with falling sales and a protracted U.S. court battle with Apple Inc. over patent infringements.

Chang Dong Hoon was replaced by Lee Min Hyouk from May 1, Samsung said in e-mailed statement without giving a reason for the switch. Chang will continue to oversee the companywide design strategy, while Lee will focus on mobile devices, including the marquee Galaxy S and Note series.

The shuffle comes about a week after Samsung posted the lowest sales at its mobile-phone business in five quarters as Chinese producers gain in emerging markets with cheaper, feature-packed devices. The Suwon, South Korea-based company’s share of the global smartphone market fell for the first time in four years, and its stock is down 1.6 percent this year.

“The latest replacement shows how much Samsung wants to give a significant makeover on its handset strategy,” said Nam Dae Jong, an analyst at Hana Daetoo Securities Co.in Seoul. “The hardware innovation and function upgrades are failing to stir consumer excitement.”

Revenue at the mobile division, the company’s biggest business, fell to 32.4 trillion won ($32 billion) in the three months ended March, the lowest since the quarter ended Dec. 31, 2012. Samsung has become more dependent on its mobile-phone business for earnings, as it now accounts for 76 percent of operating income.

S5 Freebies

The company started global sales of the Galaxy S5 smartphone last month, with features including a 5.1-inch screen, fingerprint reader, 16-megapixel camera, heart-rate sensor and water-resistant coating that can withstand 30 minutes at the bottom of a meter-deep (3-foot deep) pond.

Samsung is offering more than $600 worth of incentives to spark demand amid increasing competition from Chinese producers Huawei Technologies Co. and Xiaomi Corp., and Apple, which is boosting iPhone sales through a deal with China Mobile Ltd. (941)

S5 sales are expected to surpass those of the S4, the company has said without providing estimates. Samsung shipped 63.5 million units of the S4 through February, according to the median of three analyst estimates.

The company’s share of global smartphone shipments in the first quarter fell to about 31 percent from 32 percent a year earlier, according to Strategy Analytics.

A U.S. jury last week ordered Samsung to pay Apple $120 million for infringing on some of its patents as the two smartphone makers wage a years-long legal battle stretching around the world. Apple had sought $2 billion from Samsung.

To contact the reporter on this story: Jungah Lee in Seoul at jlee1361@bloomberg.net

To contact the editors responsible for this story: Michael Tighe at mtighe4@bloomberg.net Robert Fenner

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