Is Samsung Not the Apple Rival It’s Billed As?

Sales estimates for Samsung’s Galaxy S4 were slashed by as much as 30 percent last week, spawning investor concerns over the company’s mobile devices division. Analysts now admit to making extremely optimistic forecasts for sales of the S4, citing industry data pointing to a fast-saturated smartphone market that they previously ignored.

The first company to cut its outlook for S4 sales, on June 5, was South Korea’s Woori Investment & Securities. They were far from the last. A wave of downgrades has followed, with JP Morgan Chase , Morgan Stanley, and Goldman Sachs headlining a list of companies that have since followed Woori Investment’s lead.

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“I’d say most forecasters including myself had this conviction that they’ll outperform again — because it’s Samsung,” said Byun Hanjoon, an analyst at KB Investment & Securities. “They had beaten expectations before, which led many to believe they are bound to excel again with the S4.”

The S4 sold 10 million sets in April, its debut month, according to Reuters. Analysts were so impressed with these numbers, and Samsung’s track record of always outperforming, that they miscalculated sales going forward.

“The Street, including Goldman Sachs, admittedly extrapolated the first-quarter earnings momentum through the year,” Goldman Sachs analyst Michael Bang said in a report. “This resulted in very optimistic earnings expectations.”

Despite these reduced outlooks, Samsung isn’t worried about sales of the S4. “S4 sales are solid. It’s just that some analysts had higher expectations and then they lowered them,” J.K. Shin, head of Samsung’s mobile devices division, told reporters last week. Analysts say that lowered forecasts for S4 sales shouldn’t necessarily stop Samsung from producing record quarterly profits. The company has ventured into mid-tier phones amicably, producing four different versions of the S4, including one stripped-down version called the Galaxy Mini.

The mid- to low-tier smartphone market has to be a point of focus for Samsung, say analysts. With Apple’s (NASDAQ:AAPL) release of its iOS 7, the strongest renovation of its operating system since the original iPhone, Samsung may see some of its market share slip away. iOS 7 includes iRadio, a Pandora-like (NYSE:P) app that is built on top of the iTunes music catalog and allows the user to create their own “artist station.” This is just one of the many impressive features of iOS 7, but fortunately for Samsung, Apple doesn’t have a smartphone in the mid- or low-tier levels.

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However, the South Korea-based tech firm does face stiff competition from Chinese companies in these sectors, and the mid-tier segment accounted for less than 15 percent of Samsung’s total shipments last year.

The reduced S4 sales may have affected Samsung’s stock, but its sales should still be at record highs. More worrisome is the increased competition in the low-end smartphone segments, and Apple’s new and improved operating system.

Here’s how Apple traded on Tuesday:

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