Samsung’s quarterly profit climbs 89%

REUTERS

A man uses a Galaxy Tab 2 10.1 on display at Samsung Electronics headquarters in Seoul. Samsung says it earned a quarterly profit of about 8.8 trillion won in the fourth quarter. Photo: Reuters.

Samsung Electronics boosted quarterly profit by 89 percent as its Galaxy smartphones fended off competition from Apple’s iPhone 5, the world’s largest maker of cellphones and televisions said yesterday.

Operating profit jumped to a record 8.8 trillion won (R71.1 billion) in the three months to December, Samsung said in a statement of preliminary results. That compares with the 8.5 trillion-won average of 35 analyst estimates compiled by Bloomberg. The company did not give net income or unit figures.

Demand for Galaxy Note II and Galaxy S III phones helped boost revenue 18 percent to 56 trillion won as glitches with mapping software dented sales of iPhone 5s. The company’s use of in-house chips and displays gives it an edge in product development and allows it to keep a greater share of sales.

“Earnings will continue flying high,” said Kim Hyung Sik, an analyst at Taurus Investment Securities in Seoul.

“Samsung’s wide range of businesses is paying off handsomely.”

Daewoo Securities estimated it sold 62 million smartphones in the quarter, compared with Apple’s 45 million. The iPhone 5 went on sale last September.

Fourth-quarter operating profit might be 200 billion won higher or lower than yesterday’s estimate in audited results due later this month, Samsung said. Sales might differ by as much as 1 trillion won.

Earnings at Samsung’s cellphone unit, its biggest profit driver, probably doubled to 5.7 trillion won, according to a survey of five analysts. The display unit probably made a 1.1 trillion won profit, compared with a loss a year earlier.

“Samsung was the major beneficiary of slower-than-expected sales of Apple’s iPhone 5,” said analyst James Song of Daewoo Securities.

“The biggest challenge ahead is whether it can maintain its competitiveness in the smartphone market as high-end products are expected to be released by big players like Apple and Google.”

The South Korean company is in a global patent legal fight with Apple. Apple is also Samsung’s biggest customer as its chips are used in iPhones.

Samsung fell 1.3 percent to 1 500 000 won at the close of trading in Seoul. The company surged 44 percent last year, compared with a 31 percent gain for Apple in New York.

Earnings may have disappointed some investors because expectations were rising ahead of the statement, said Sean Kim, a Seoul-based analyst at Standard Chartered Bank.

“The biggest risk factor is the strengthening won,” Kim said. “In the longer term, possible price competition in the smartphone space poses a risk.”

The won traded at about 1 063 to the dollar yesterday. It may hit 1 030 this year, according to Standard Chartered.

Sales of the Galaxy S III reached 30 million units within five months of its May debut, Samsung said in November.

“The continued strong sales of its smartphones will create synergies with its component businesses,” Kim said. “It can develop products faster than any other companies out there because of its vertically integrated structure.” – Jungah Lee Seoul from Bloomberg