Samsung Electronics Co. (005930), Asia’s largest consumer-electronics maker, reported a better-than- estimated first-quarter profit after surging sales of Galaxy smartphones helped mask slumping earnings at the chip business.
Net income jumped 81 percent from a year earlier to 5.05 trillion won ($4.4 billion), the Suwon, South Korea-based company said in a statement today, beating the 4.24 trillion-won average of 29 analyst estimates compiled by Bloomberg.
Shares of Samsung, the world’s biggest maker of TVs and chips, rose to a record in Seoul as profit at the mobile-phone business almost tripled in the quarter, with new models such as the Galaxy Note taking on Apple Inc. (AAPL)’s iPhone and iPad. Samsung, which overtook Nokia Oyj as the world’s biggest handset maker in the first quarter, said its momentum in the $219 billion smartphone market will continue with “remarkable” demand in emerging markets.
“The biggest driver now is smartphones,” Park Jong Min, a portfolio manager at ING Investment Management Korea Ltd., which oversees about $17 billion, said by phone today. “It will stay good in the second quarter as new models are released.”
Samsung shares rose 2.5 percent to a record close of 1,374,000 won in Seoul. The shares have gained 30 percent this year, compared with a 50 percent jump for Apple.
Smartphones
Operating profit at the mobile business in the quarter was 4.27 trillion won, the company said in the statement, beating the 4.01 trillion-won median estimate in a Bloomberg News survey of four analysts. Samsung overtook Nokia as the world’s biggest handset seller for the first time in the three months ended March 31, according to analyst estimates.
Samsung shipped 93.5 million phones in the first quarter, compared with Nokia (NOK1V)’s 82.7 million, market researcher Strategy Analytics said in a statement today. Samsung also regained the lead from Apple as the world’s biggest vendor of smartphones in the first quarter, Strategy Analytics said.
Samsung plans to double sales of smartphones and tablet computers this year, helped by new products, the company said in February. Including basic phones, Samsung expects to sell about 380 million handsets this year after shipping a record 300 million units last year.
“Growth is especially remarkable in emerging markets led by China, Southeast Asia and the Middle East,” Kim Hyun Joon, a vice president at the mobile-phone business, said during a conference call.
Apple’s Siri
Samsung, which plans to unveil a successor in London next month for the Galaxy phone, last year announced it will make the first mobile phone to run on Google Inc.’s Ice Cream Sandwich operating system. The Samsung Galaxy Nexus has “talk-to-type” technology, image-editing tools, offline search for e-mails and facial-recognition technology to take on the iPhone, which has the “Siri” voice-recognition technology.
Samsung and Apple have been suing each other in the past year on four continents regarding patent-infringement claims related to mobile technology and design. Apple is Samsung’s biggest customer, buying chips and displays from the South Korean company and accounting for 7.6 percent of its revenue, according to data compiled by Bloomberg.
Operating profit at the chip business in the first quarter was 760 billion won, down 54 percent from a year earlier, the company said in the statement. That lagged behind the analysts’ estimate for 1.31 trillion won.
Chip Business
Samsung, the exclusive manufacturer of processors powering the iPhone and iPad, also will benefit from rising sales of chips used in mobile devices, said Ahn Seong Ho, a Seoul-based analyst at Hanwha Securities Co.
The price of the benchmark DDR3 2-gigabit DRAM closed at $1.02 on April 26, compared with $1.95 a year earlier, according to data from Taipei-based DRAMeXchange, operator of Asia’s largest spot market for semiconductors. The Dynamic Random Access Memory, or DRAM, chip is the most common memory in laptops and computers.
Falling chip prices pushed smaller Japanese competitor Elpida Memory Inc. into bankruptcy earlier this year, while Micron Technology Inc. (MU) reported a third consecutive quarterly loss in March.
Demand for memory chips slowed in the first quarter as hard-disk drive output didn’t recover as fast as expected after floods in Thailand, a key production site, Choi Sung Jae, a Seoul-based analyst at SK Securities Co., said in a March 30 report. Elpida’s bankruptcy will likely prompt major chip buyers, including Apple, Dell Inc. and Hewlett-Packard Co. (HPQ), to seek alternative suppliers, helping boost prices in the second quarter, Choi wrote.
TV Shipments
Samsung plans to invest $7 billion to build a factory in China producing NAND flash, a different type of memory widely used in smartphones and tablet computers.
Profit at Samsung’s display unit in the quarter was 280 billion won, compared with a loss of 230 billion won last year. Operating profit at the consumer-electronics unit, which includes TVs, was 530 billion won, compared with a profit of 8 billion won a year earlier, Samsung said.
Last year, global TV shipments fell for the first time since 2004, according to DisplaySearch, part of NPD Group. Flat- screen TV shipments in the U.S. may fall for the first time this year, to 37.1 million units from 39.1 million in 2011, according to iSuppli.
Samsung had a record market share in the U.S. LCD TV market in the fourth quarter, accounting for about 25 percent of total shipments, helped by a wide range of models and features, iSuppli said this month.
“The most notable result in the first quarter was sales of the premium TV business,” Kim Dae Hyun, a vice president at the TV business, said during the call. “This led to a significant improvement in our profitability.”
Source: Bloomberg
