Samsung earned less than even the most conservative analyst forecast in October-December after handing out an estimated $1 billion in bonuses to mark 20 years since its chairman set it on the road to becoming a global behemoth.
The world's largest smartphone maker has splashed out on its employees from a cash pile of around $50 billion just two months after increasing its dividend yield far less than many investors had expected.
Fourth-quarter operating profit was likely 8.3 trillion won (AUD$10 billion), down 6 percent on year and 18 percent from a record third quarter, Samsung said on Tuesday before a final reading on January 24.
The figure was pulled down by bonuses given to employees high and low commemorating Chairman Lee Kun-hee's "New Management" strategy which analysts put at 300 billion to 700 billion won.
The profit would be less than the most bearish forecast among 23 analysts polled by Reuters of 8.8 trillion won, and would be the lowest since the 8.1 trillion won of July-September 2012.
Samsung shares traded unchanged at 1.307 million won after the announcement, versus a 0.3 percent gain in the wider market.
"Samsung's special incentive payments to employees including domestic and overseas units appear to have been much larger than the market expected; marketing costs of its mobile business might have also been larger," said Shinhan Investment analyst Kim Young-chan.
Lee, who took over Samsung Group in 1987 from his founder-father, in 1993 ordered lieutenants to "change everything except your wife and children" to transform Samsung Electronics from a mid-tier television set manufacturer into a global technology leader.
It has since overtaken Sony in TVs, Nokia in mobile phones and Apple in smartphones.
Lee, who turns 72 this week, set the agenda for the future in his New Year speech by stressing the need to drop a hardware-centric culture and adopt new ways of thinking to drive innovation.
The company usually pays bonuses up to 100 percent of basic monthly salary to employees in units which achieve targets, and up to 50 percent of annual salary by returning 20 percent of profits that exceed targets. Korean companies often pay low salaries and top up with various bonuses.
Fourth-quarter earnings were also likely affected by Samsung's flagship Galaxy S and Note smartphones losing out somewhat to Apple in the United States and Japan during the year-end holiday season.
It estimated fourth-quarter sales of 59 trillion won, versus the 61 trillion won Thomson Reuters' Starmine SmartEstimate of 23 analysts, which gives greater weighting to the more accurate analysts.
Samsung is bracing itself for its toughest year at its mobile devices division since it started making smartphones in 2007, with analyst estimates ranging from low single digit profit growth to mild contraction after growing eight times over in past five years.
The division, which earns two thirds of overall operating profit, will come under pressure when Apple makes its phones available from January 17 via China Mobile through which Samsung has been selling smartphones for around seven years.
Apple is also widely expected to sell smartphones with larger screens come autumn when it traditionally announces products, neutralising a selling point that Samsung has enjoyed since introducing its Galaxy Note in late 2011.
"Even taking into account one-off costs, the (fourth-quarter) profit is lower than expected. Samsung has not provided details, but smartphone profit may have fared worse than expected, given increased marketing expenses," said IBK Investment & Securities analyst Lee Seung-woo.
Weak smartphones sales would translate into weaker earnings at Samsung's components businesses, particularly its display unit which counts Samsung's mobile and TV arms as its biggest customers.
Samsung shares have been pummelled in recent weeks by 22 analysts downgrading fourth-quarter earnings estimates over the past 30 days.
The shares, worth $190 billion, fell 10 percent over the past fortnight to a 4-month low last week, wiping off market value to the tune of $19 billion - equal to the total value of shares of Sony.
The won's rise to a five-year high against the US dollar has also been prompting investors to sell, as a strong won reduces the value of Samsung's repatriated earnings.