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UPDATE 1-Samsung sees Q1 handset sales, margins picking up
Thu Dec 2, 2004 12:00 AM ET
(Adds Deutsche downgrade, details, shares)
SEOUL, Dec 2 (Reuters) - Samsung Electronics Co. Ltd. (005930.KS: Quote, Profile, Research) said on Thursday it expected mobile phone sales volumes and profit margins to pick up in the first quarter of next year after cleaning up inventories by the end of 2004.
Samsung, the world's second-largest cellphone maker according to research group Gartner, said it would make ground into lucrative GSM markets including CIS countries and China, and shipments of third generation phones would boost average prices.
The South Korean firm said in a presentation prepared for a UBS investor conference that it would continue to increase global marketing spending in the fourth quarter. The investor forum was closed to the media.
A price war raging in the mobile phone market with price cuts from mobile phone market leader Nokia (NOK1V.HE: Quote, Profile, Research) has been forcing Samsung to sacrifice margin by following suit and spending more to lure customers.
It is also suffering from crumbling prices of flat screens for televisions and computers, and a bearish outlook for memory chips. Deutsche Bank cut its recommendation on Samsung to "sell" from "hold" on Thursday, a first move among key investment banks.
"We believe increases in advertising and promotion costs will eat into the company's handsets margins in the fourth quarter," said D.J. Yook, analyst at Deutsche Bank, who cut Samsung's 2005 handset margin forecast to 14 percent from 16 percent in 2004.
"We believe intensifying competition and commoditisation of high-end handsets will also lead to downward pressure on handset average selling prices going forward. Compared to a year ago, most handset producers have a wide range of high-end models with camera, camcorder, MP3 functions," he said.
Samsung overtook Motorola (MOT.N: Quote, Profile, Research) as the world's second-biggest mobile phone maker in the third quarter with a 13.8 percent market share from 12.1 percent in the second quarter, Gartner said on Wednesday.
Samsung's growth has been driven by a combination of innovative designs, cutting-edge technology and aggressive marketing.
The firm has targeted emerging markets as well as customers in developed ones with its range of clam-shell handsets, incorporating colour screens and tiny digital cameras.
Shares in Samsung were up 0.35 percent at 430,500 won at 0433 GMT, lagging the broader market's 1.17 percent advance. |
