"The slowdown in its handset business appears to be worse than expected and the disappointing result simply reindorses the market view that Samsung's smartphone growth momentum is slowing," said Lee Sei-chul, an analyst at Meritz Securities.
"But it's got the component side of the business, which is showing solid improvements, and new handset product lineups for the third quarter, so (overall) earnings are likely to grow again in the current quarter."
Shares of Samsung, worth $185 billion, have dropped 15 percent since early June, hit by a series of brokerage downgrades. The share price reflects concerns about Samsung's handset margins, with its mobile business generating 70 percent of the tech giant's total profit.
The fall in the share price equates to a drop in market value of 33 trillion won ($29 billion), almost equal to the combined market capitalization of Sony Corp and LG Electronics Inc.
Competition is getting intense with Chinese manufacturers such as Huawei Technologies Co Ltd and ZTE Corp making ground in the popular mid- to low-end market, especially in China, the world's biggest mobile market.
Underscoring the growing focus on cheaper devices, Nokia Oyj, once the handset king, unveiled two stripped-down 3G phones this week. They allow access to popular applications such as Facebook and Twitter, and sell for just $68.
Making up for weakening growth in mobiles, Samsung's component business is expected to show a solid recovery.
Prices of dynamic random access memory (DRAM) chips, used mainly in computers, have leapt nearly 90 percent so far this year even as PC sales plummeted, while the market for NAND memory chips has tightened on booming demand from mobile devices.
(Reporting by Miyoung Kim; Editing by Stephen Coates)
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