BREAKING..Samsung Posts Record Quarterly Profit on Galaxy Phone Sales
By Jun Yang on July 05, 2012
businessweek.com
Samsung Electronics Co. (005930), the world’s largest maker of televisions and mobile phones, posted a record quarterly profit that beat analysts’ estimates as surging sales of Galaxy smartphones helped it challenge Apple Inc. (AAPL) ( AAPL)’s iPhone.
Operating profit totaled 6.7 trillion won ($5.9 billion) in the three months ended in June, a 79 percent jump from a year earlier, the Suwon, South Korea-based company said in a statement today. The average of 32 analysts’ estimates compiled by Bloomberg was 6.58 trillion won.
Earnings at the mobile-phone business more than doubled in the quarter, with products such as the Galaxy Note helping the world’s biggest computer-memory chip maker mask a slump in profit from semiconductor sales, according to a survey of six analysts by Bloomberg News. While seeking to cement its dominance in TVs with new models, Samsung is targeting record phone sales this year to keep its lead over Apple, a key customer it’s also been fighting in global patent lawsuits.
“Earnings growth, led by smartphones, continued into the second quarter,” Brian Park, a Seoul-based analyst at Tong Yang Securities Inc., said by phone. “With today’s numbers, any concern about Samsung’s business, as well as overall demand for technology products, can be put to rest for now.”
Samsung shares rose 0.3 percent to 1,188,000 won as of 9:10 a.m., while the benchmark Kospi index slipped 0.6 percent. The stock has advanced 12 percent this year.
Operating profit may be 200 billion won higher or lower than today’s preliminary estimate when audited results are announced later this month, Samsung said. The company didn’t provide net income for the quarter or divisional earnings.
Galaxy S IIIOperating profit at the telecommunications business more than doubled to 4.42 trillion won from 1.67 trillion won, according to the median of six analyst estimates compiled by Bloomberg News. Sales probably almost doubled to 24.1 trillion won, according to the survey.
Samsung probably shipped 50 million smartphones in the second quarter, Matt Evans, a Seoul-based analyst at CLSA Asia- Pacific Markets, said in a June 20 report. He cut his estimate from 53.4 million units, citing lower-than-expected sales of cheaper models in emerging markets, and competition from Huawei Technologies Co. and ZTE Corp.
Shipments of the Galaxy S III, the latest version of Samsung’s best-selling smartphone line-up, probably totaled 7 million units by the end of June since the model went on sale the previous month, Song Myung Sup, a Seoul-based analyst at HI Investment & Securities Co., said in a June 27 report.
That was fewer than expected as production was hampered by a shortage of components such as chips and cases, he wrote.
Beating NokiaSamsung is unable to keep up with demand for the new phone and doesn’t have trouble sourcing parts, the company said in an e-mailed statement on June 28. A delay in shipments in the U.S. is a “temporary situation,” according to the statement.
The Korean company overtook Nokia Oyj (NOK1V) as the world’s largest handset maker for the first time and regained the lead in smartphones from Apple in the first quarter.
Samsung has been fighting patent battles related to mobile- phone technology and design for more than a year with Apple, also the South Korean company’s largest customer. Apple won a U.S. court order on June 29 to block sales of Samsung’s Galaxy Nexus smartphone, the first smartphone to use Google Inc. (GOOG) ( GOOG)’s Android 4.0 operating system.
Profit at the semiconductor division fell 29 percent to 1.3 trillion won amid a decline in global personal-computer demand, according to the Bloomberg News survey.
Chip PricesThe price of the benchmark DDR3 2-gigabit DRAM averaged $1.03 in the last quarter, compared with $1.82 a year earlier, according to data compiled by Bloomberg.
The price drop pushed Elpida Memory Inc. to file for Japan’s biggest bankruptcy in two years in February. Earlier this week, Micron Technology Inc. (MU) ( MU)agreed to buy the bankrupt chipmaker to double its market share after four consecutive quarters of losses.
Manufacturers of DRAM, used in PCs to help multiple applications run smoothly, may slow output increases in the third quarter, helping boost prices, HI’s Song said in his June 27 report.
Samsung, the exclusive manufacturer of Apple-designed chips powering the iPhone and the iPad, has been diversifying away from PC DRAM to more profitable semiconductor products used in mobile devices and servers to beat downturns in the computer- memory industry.
TV Sales
Last month, the company said it plans to spend 2.25 trillion won to build a new plant making mobile-phone processors. Samsung plans to spend 15 trillion won on the semiconductor business this year.
Samsung’s display business had an operating profit of 525 billion won, compared with a loss of 210 billion won a year earlier, according to the survey.
While flat-screen TV sales aren’t picking up, the company is benefiting from demand for displays used in mobile devices. Operating profit at the unit making panels for smartphones including Samsung’s own Galaxy models more than tripled in the second quarter, accounting for 86 percent of earnings at the display business, according to IBK Securities Co. estimates.
Global TV shipments fell for the first time since 2004 last year, according to DisplaySearch, part of NPD Group. Worldwide TV shipments fell about 8 percent in the first quarter as sales of liquid-crystal-display models dropped on an annual basis for the first time, the research company said on June 20.
Samsung’s consumer-electronics business, which includes TV operations, probably boosted operating profit to 580 billion won from 510 billion won a year earlier, according to the survey.
“Chips and display businesses will also recover,” said Park Jong Min, a portfolio manager at ING Investment Management Korea Ltd., which oversees about $17 billion. “It will be more gradual because demand growth is limited with the global economy slowing down.”
Following is a table showing median operating-profit estimates for the four main business divisions of Samsung. The estimates are in billions of won and (-) indicates a loss.
DIVISION 2Q 2012 2Q 2011
Chip 1266 1790
LCD 525 -210
Phone 4421 1670
TV 580 510
To contact the reporter on this story: Jun Yang in Seoul at jyang180@bloomberg.net
To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net |
