The Samsung Reorganizes ...
Collapsing global demand is pushing even electronics industry leader Samsung Electronics into the red, forcing a shake-up at the company. In order to combat the slowing economy, Samsung will reorganize into two major divisions ...
• Digital Media and Communications will focus on consumer products such as cell phones, PCs, and televisions. Choi Gee-sung will be elevated to head the consumer electronics division. vice chairman Lee Ki-tae, who ran the mobile phone business before Choi, will leave the company.
• Device Solutions will handle displays and memory chips. Current CEO Lee Yoon-woo will helm the struggling Device Solution division. Hwang Chang-kyu, the head of the semiconductor unit will leave the company.
>> Samsung Undergoes Major Revamp
The electronics company will consolidate into a consumer electronics division and a device component division.
Marin Perez
InformationWeek
January 16, 2009
tinyurl.com
In order to combat a slowing economy, Samsung will reorganize into two major divisions.
The electronics company had previously operated separate divisions for chips, liquid crystal displays, cell phones, and consumer electronics. It will consolidate its businesses into a Digital Media and Communications division that focuses on consumer products such as cell phones and televisions, and a Device Solution division that handles displays and memory chips.
The move comes as the company faces a slumping economy that's leading to decreased demand and prices for semiconductors and flat screens. Samsung's chips division has been dragging down the company, and for the third quarter of 2008 the company saw its net profits decline 44% from the year before.
The cell phone and digital media divisions have been gaining traction though, and both offer high profit margins for the company. The company is now the second-largest cell phone manufacturer behind Nokia (NYSE: NOK), and its consumer electronics products are rapidly gaining market share from the likes of Sony (NYSE: SNE).
The company will announce its fourth-quarter earnings Jan. 23, and most analysts expect the chip division to post a significant loss. This loss may be overcome by profits in other divisions, but the company is expected to post its worst quarterly earnings in at least eight years.
The restructuring is also leading to a shakeup in management. Current CEO Lee Yoon-woo will helm the struggling Device Solution division, and Choi Gee-sung will be elevated to head the consumer electronics division. Hwang Chang-kyu, the head of the semiconductor unit, and vice chairman Lee Ki-tae, who ran the mobile phone business before Choi, will leave the company. Additionally, top executives will be taking a 20% pay cut and employees will have some benefits trimmed.
"A new wave of young talent was chosen to overcome the global downturn," Samsung said in a statement. ###
>> As Earnings Hit A Dry Spell, Samsung Prunes
Tina Wang,
Forbes
01.16.09
tinyurl.com
The South Korean electronics giant faces its first operating loss since starting reporting publicly in 2000 and reorganizes itself.
Collapsing global demand is pushing even electronics industry leader Samsung Electronics into the red, forcing a shake-up at the company. The crown jewel of South Korea's No. 1 chaebol, or conglomerate, is expected to run its first quarterly loss in at least eight years. No surprise, then, that the company said Friday it is revamping its business and leadership.
Samsung Electronics is essentially consolidating its businesses into "good" and "bad" groups. The company will lump together its memory chip and liquid crystal display units, both currently dealing with a supply glut and depressed prices, into one electronic components division. It will also combine the promising telecoms and digital media operations, which currently offer the best profit margins for the company, into a consumer products division.
The management shuffle is telling as well. Star executive Choi Gee-sung, who proved his mettle revamping the company's cell phone business, will run the consumer products division, including handsets, televisions and other home appliances. Vice chairmen Lee Ki-tae, who ran the mobile phone business before Choi, and Hwang Chang-kyu, who ran the semiconductor operation, will leave the company. Some analysts say that, under Lee's direction, the company's handset business got bogged down by pricey gadgetry and an overload of features. In contrast, during his tenure as head of telecom, Choi pushed for cheap, high-volume phones for emerging markets and more aggressive marketing (see "Choi Moves Samsung's Mobile Biz In New Direction"), a strategy that proved fortuitously timed to global slowdown and recession.
Samsung Electronics Chief Executive Lee Yoon-woo, who is retaining his post, will oversee the "challenged" electronic parts business. Analysts do not expect a turnaround of the chip and LCD sectors until at least the second half of 2009, when consolidation and capacity cutting promises to power a price rebound.
Samsung Electronics is forecast to post a 2008 fourth-quarter operating loss of 400 billion won ($294.6 million) and 2009 first-quarter operating loss of 600 billion won ($441.8 million), according to Seoul-based Daewoo Securities analyst James Song. A Jan. 12 research note from UBS forecast a 2009 first-quarter operating loss of 567 billion won ($417.5 million), after a 2008 fourth-quarter operating profit of 143 billion won ($105.3 million). Samsung Electronics e-mailed a statement noting that the company has not posted an operating loss since first releasing quarterly earnings in 2000.
Still, the company is flush with cash and is gaining market share against competitors. Japanese rival Sony (nyse: SNE - news - people ) is on track to post its first-ever yearly operating loss. (See "Earnings Collapse Looming For Sony.") Samsung Electronics may be able to eke out a profit by cutting its employee profit-sharing programs, but its core businesses are essentially in a loss-making period, Song observed.
Parent company Samsung Group, the country's most prominent family-controlled conglomerate, said Friday it had reassigned 25 chief executives in its 59 affiliated companies, promoting some and laying off others. It slashed executive salaries by up to 20% and cut employee benefits. The management reorganization is a "transition period" that paves the way for Lee Jae-yong, son of disgraced former Samsung chairman Lee Kun-hee who resigned in April amid a sweeping corruption scandal, to take the helm eventually, Song said. ###
- Eric - |
