By Jun Yang - Apr 27, 2012 6:58 AM GMT+0700
Samsung Electronics Co. (005930), Asia’s largest consumer-electronics maker, posted first-quarter profit that beat analysts’ estimates as surging sales of Galaxy smartphones helped mask slumping earnings at the chip business.
Net income was 5.05 trillion won ($4.4 billion), the Suwon, South Korea-based company said in a statement today. The average of 29 analyst estimates compiled by Bloomberg was for profit of 4.24 trillion won.
A Samsung Electronics Co. Galaxy Note smartphone. Photographer: SeongJoon Cho/Bloomberg
Operating profit at the mobile-phone business gained in the quarter from a year earlier after Samsung unveiled new models such as the Galaxy Note to take on Apple Inc. (AAPL)’s iPhone and iPad. Samsung, which likely overtook Nokia Oyj as the world’s biggest handset maker in the first quarter, is counting on Galaxy products to capitalize on the $219 billion smartphone market and shield earnings as chip prices plunge.
“Earnings will only get better starting in the second quarter,” Ahn Seong Ho, a Seoul-based analyst at Hanwha Securities Co., said by phone before today’s announcement. “We don’t see anything particular that can slow down momentum on the phone side. The semiconductor side will improve after bottoming out in the first quarter, too.”
Samsung shares rose 2.7 percent to 1,340,000 won in Seoul trading yesterday. They have gained 27 percent this year, compared with a 50 percent jump in Apple.
Smartphones
Operating profit at the mobile business in the quarter almost tripled to 4.27 trillion won, the company said in the statement today. That beat the 4.01 trillion-won median estimate in a Bloomberg News survey of four analysts.
The company probably overtook Nokia (NOK1V) as the world’s biggest handset seller for the first time in the three months ended March 31, according to analyst estimates.
Samsung may have shipped about 92 million mobile phones, including basic types, during that period, according to the median of five estimates in a Bloomberg News survey. Nokia sold 83 million, including 12 million smartphones and 71 million low- end models, the Espoo, Finland-based company said this month.
Samsung probably sold 44 million smartphones in the first quarter, more than tripling from a year earlier, Matt Evans, a Seoul-based analyst at CLSA Asia-Pacific Markets, said in an April 2 report. That would make Samsung the top smartphone seller during the three-month period.
Samsung vs Apple
Apple sold 35.1 million iPhones during the quarter ended in March, helping the Cupertino, California-based company report a 94 percent surge in profit, the company said April 25. Apple sold 11.8 million iPads.
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.
Global sales of the Galaxy S II smartphone reached 20 million just 10 months after going on sale, about seven months faster than its predecessor, Samsung said in February. The Galaxy phones and tablets compete with Apple’s iPhone and iPad.
Samsung plans to unveil a successor in London next month.
The company sold more than 5 million units of the Galaxy Note, equipped with a 5.3-inch screen and a stylus, since its debut in October. Samsung expects to sell 10 million units of the model by year’s end and plans to introduce more pen-equipped products with different screen sizes.
Chip Prices
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.
Samsung, the exclusive manufacturer of processors powering the iPhone and iPad, also will benefit from rising sales of chips used in mobile devices, Ahn said.
“Samsung is not just a DRAM company,” he said.
Elpida, Micron
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.
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.
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.
Display Profit
Profit at the display unit in the quarter was 280 billion won, compared with a loss of 230 billion won last year. Operating profit at the TV business was 530 billion won compared with a profit of 8 billion won a year earlier, Samsung said.
Samsung is the world’s biggest TV manufacturer.
While liquid-crystal-display prices were suppressed by slowing TV demand, panels used in mobile devices such as phones and tablets helped boost earnings, Choi at SK said. Samsung supplies Apple with screens used in the latest iPad, according to research company IHS Inc.’s iSuppli. Samsung spun off the LCD business April 1.
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.
To contact the reporter on this story: Jun Yang in Seoul at jyang180@bloomberg.net
To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net
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