Samsung doubles its third-quarter profit
By Bloomberg News
October 23, 2000, 7:00 a.m. PT
SEOUL, South Korea--Samsung, the world's largest producer of computer memory chips, said its third-quarter net income more than doubled to a record on strong demand for its major product from personal-computer makers.
The company said profit rose 146 percent to $1.5 billion (1.7 trillion won) on a larger-than-expected price surge that began in June, as PC manufacturers stockpiled chips in anticipation of higher year-end demand.
While Samsung enjoyed strong product prices in the third quarter, investors are interested in how the company sees demand changing up to the end of the year, as a slump in chip prices over the last month takes its toll on Samsung's share price.
"It's difficult to give a forecast for prices for our chips because our product range is so wide, but we can say, in general, that we expect prices to weaken further in the fourth quarter," said Lee Yoon Woon, president of Samsung's semiconductor division.
The rate at which prices decline will slow, he said. The spot price for the industry-standard 64-megabit 8-by-8 PC100 dynamic random access memory (DRAM) chip--used by investors to gauge demand--surged by a quarter in June and remained at more than $8.50 per chip until the end of August. DRAM makers estimate they can make a profit selling the chips at $4 each.
Samsung shares, though, fell by 40 percent from the beginning of September, as the spot price for the 64-megabit DRAM fell to less than $5, indicating demand might not meet expectations.
"Although Samsung's chip earnings are relatively more stable than others, we may see a decline in its figures in the next quarter due to (a) fall in spot prices," said Koo Hee Jin, a semiconductor analyst at LG Investment & Securities.
Surging chip sales
Samsung said third-quarter sales rose 38 percent to $7.8 billion, compared with the same period in 1999. Export sales increased 50 percent to $5.9 billion, and domestic sales rose 15 percent to $2.2 billion.
Sales at the company's semiconductor division rose 71 percent from the same period last year to $3.4 billion. Within the division, memory chip sales doubled to $2.4 billion, and thin-film transistor (TFT) LCD sales rose 6 percent to $531 million.
Sales at Samsung's telecommunications unit, which makes mobile phones and network equipment, slumped 6 percent from a year earlier to $1.4 billion. Samsung's digital media products division, which makes music-file players and set-top boxes, saw sales increase by 40 percent to $2.2 billion. Home appliance sales rose 25 percent to $620,200.
In the six months through June 30, Samsung's net income rose to $2.8 billion, compared with $1.19 billion during the same period in 1999.
Samsung's stock has declined 40 percent this year.
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