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Today in the Market (1/9/2024)

Good Morning! On Tuesday, U.S. stocks were mixed with a key player from the tech sector, Samsung, seeing its 6th straight quarter of declining operating profit.

The S&P 500 and the Dow Jones saw declines in the day by 0.15% & 0.42%, while the Nasdaq barely finished above by 0.09%, even with the disappointment from Samsung.

IT IS DIFFERENT THIS TIME

Unity Software (U) has just announced significant workforce reductions. However, Wall Street’s confidence in the corporate restructuring plan seems to be lacking, as the company’s shares saw a nearly 7% decline on the announcement of its intention to lay off around 1,800 people or 25% of its staff.

So how is this different from the other layoffs for other companies? In most cases, this has often increased a company’s stock value, driven by the anticipation of reduced expenses and improved operational effectiveness. However, the layoffs occurred at a difficult time for the firm following the revised pricing structure in September, which entails developers being billed based on the number of downloads they get, which resulted in a strong negative reaction from consumers, compelling the corporation to reverse its decision quickly.

It doesn’t stop there, sadly… The chief executive, John Riccitiello, announced his intention to resign. In addition, Unity failed to meet profitability projections in its last quarterly report in November and chose not to provide estimates for the fourth quarter.

SIXTH TIME'S THE CHARM? NOPE

Samsung Electronics Co. reported a decline in operating profit for the sixth consecutive quarter, indicating a decrease in consumer demand and raising doubts about when the wider technology industry would recover.

So how bad was it? The biggest corporation in Korea had a decline of 35% in its operating income, amounting to 2.8 trillion won ($2.1 billion), which fell short of projections by around 24%. On top of that, Samsung had its lowest operating profit in 15 years over the year 2023.

The big picture… The findings emphasize the persistently slow demand for smartphones and memory chips, which are essential components of contemporary electronic devices, due to economic uncertainties. Furthermore, it complicates the prospects of a market resurgence that several investors had anticipated to materialize in 2024. However, Samsung is relying on a fresh range of devices and folding devices to stimulate growth in 2024. They are making preparations to introduce their most recent technological devices in the U.S. later this month.

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