(Updates with closing share price in the fifth paragraph.)
July 7 (Bloomberg) -- Samsung Electronics Co., the world’s largest maker of televisions, posted a 26 percent drop in second-quarter profit after a slump in sales of flat screens masked a surge in demand for smartphones and tablet computers.
Operating profit in the three months ended June fell to about 3.7 trillion won ($3.5 billion), compared with 5.01 trillion won a year earlier, the Suwon, South Korea-based company said in a statement today, without giving an explanation. That compared with the 3.8 trillion won average of 25 analyst estimates compiled by Bloomberg.
Flat-panel business probably had a loss for a second consecutive quarter as TV makers held back purchasing displays, according to six analysts surveyed by Bloomberg News. That damped earnings at the company, which is counting on the new Galaxy smartphone and a bigger tablet computer to take on Apple Inc. and revive earnings.
“Overall demand for technology products has been very weak,” said Im Jeong Jae, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $29 billion. “If demand for tablets and 3-D TVs recovers, the panel business can turn around fast.”
Samsung shares dropped 2 percent to 880,000 won at the 3:00 p.m. close of trading in Seoul, while the benchmark Kospi index gained 0.4 percent. The stock has fallen 7.3 percent this year.
Sales rose 2.9 percent to 39 trillion won.
Samsung’s display division, which makes flat panels for televisions and computer monitors, likely had an operating loss of 73.5 billion won, compared with an 880 billion won profit a year earlier, according to the median of a survey of six analysts by Bloomberg News. Sales probably fell about 11 percent, according to the survey.
Operating profit at Samsung’s TV-making unit may have dropped 53 percent to 168 billion won, according to the survey.
A glut in the liquid-crystal display market may persist until the first half of 2012 as TV makers keep high inventory and panel manufacturers increase output, Seo Won Seok, a Seoul- based analyst at NH Investment, said in a June 7 report.
Shipments of large-sized LCD panels will grow by 14 percent in 2011, compared with a 23 percent increase in 2010, on weaker demand for TVs and computer monitors, research company IHS ISuppli said May 16.
Profit at the semiconductor division probably fell 33 percent to 1.96 trillion won, according to the Bloomberg News survey. Sales may have risen to 10 trillion won from 9.5 trillion a year ago.
The price of the benchmark DDR3 2-gigabit DRAM fell 30 percent in the second quarter, according to data from Taipei- based Dramexchange Technology Inc., operator of Asia’s largest spot market for semiconductors.
DRAM chips are used to store data temporarily to help devices run multiple programs at the same time on computers.
Personal-computer shipments will grow at a slower pace than previously forecast as consumers reach for Apple Inc.’s iPad and other tablet computers, Gartner Inc. said in March. Gartner lowered its projection for worldwide shipments this year to 387.8 million units, or 10.5 percent growth, from an earlier projection of 15.9 percent growth.
Demand for higher-priced chips used in mobile devices and servers, as well as application processors for smartphones, may help Samsung weather the downturn, NH’s Seo said.
Profit at the telecommunications unit likely more than doubled to 1.5 trillion won, according to the survey. Sales may have gained 32 percent to 11.62 trillion won.
The company, which aims to sell 60 million smartphones this year, is estimated to have shipped 19.2 million units of such handsets in the second quarter, Charles Park, a Hong Kong-based analyst for Mizuho Securities Asia, said in a June 24 report.
Samsung’s global smartphone sales rose more than fourfold to 10.8 million units in the first quarter on the popularity of Android devices, making it the fourth-biggest seller of smartphones, according to research firm IDC Corp.
Helped by sales of Galaxy devices and lower-priced models, Samsung, the No. 2 mobile-phone maker in the world, will further narrow the gap with the market-leader Nokia OJY by the fourth quarter, NH’s Seo said in the report.
Samsung’s share in global smartphone market in the first quarter jumped to 10.8 percent from 4.3 percent a year earlier, while Nokia’s share slipped to 24.3 percent from 38.8 percent, according to IDC.
Samsung unveiled a new tablet computer with a larger screen than the existing Galaxy Tab and an update to its Galaxy S smartphone in February. The latest 10-inch device from Samsung, weighing 599 grams and 10.9 millimeters thick, is built with Android 3.0 Honeycomb software and equipped with a dual-core processor that allows faster Web browsing and multimedia-content viewing, according to Samsung.
“Only the phone business is holding up,” Kim Sung In, a Seoul-based analyst at Kiwoom Securities Co. said by telephone before today’s announcement. “Everything else is looking bad. There’s no bright picture for the company looking ahead.”
--Editors: Anand Krishnamoorthy, Young-Sam Cho.
To contact the reporter on this story: Jun Yang in Seoul at firstname.lastname@example.org
To contact the editor responsible for this story: Young-Sam Cho at email@example.com.