Bloomberg News

Samsung Net Beats Estimates as Handsets Outweigh Panel Glut

July 29, 2011

(Updates with closing share price in the fifth paragraph.)

July 29 (Bloomberg) -- Samsung Electronics Co., the world’s largest maker of televisions and flat-screen panels, reported a greater-than-estimated second-quarter profit after sales of mobile phones masked a drop in panel demand.

Net income fell 18 percent from a year earlier to 3.51 trillion won ($3.3 billion) in the three months ended June, the Suwon, South Korea-based company said in a statement today. The average of 21 analysts’ estimates compiled by Bloomberg was for a profit of 3.4 trillion won.

Earnings at Samsung’s telecommunication unit more than doubled in the quarter because of demand for Galaxy smartphones, which compete with Apple Inc.’s iPhone. That helped the company overcome falling prices of memory chips and weakening demand for display panels used in computers and other electronic devices.

“Overall demand for electronics products is slower than expected, but their handsets are doing well,” said Yoo Byung Ok, a Seoul-based fund manager at UBS Hana Asset Management Co., which manages about $17 billion.

Samsung rose 0.8 percent to 844,000 won at the 3:00 p.m. close of trading in Seoul, while South Korea’s benchmark Kospi index slipped 1.1 percent.

Profit at the telecommunication unit rose to 1.67 trillion won from 630 billion won, the company said in the statement today. That beat the 1.6 trillion won median of five analyst estimates compiled by Bloomberg. Sales gained 43 percent to 12.18 trillion won.

Coming Close to Apple

Samsung sold 19.2 million smartphones in the second quarter, surpassing Nokia Oyj for the first time and falling short of Apple’s 20.3 million iPhones, research firm Strategy Analytics said today.

Including basic phones, Samsung will probably have a 20 percent market share this year, compared with Nokia’s 26 percent, closing the gap to the narrowest ever, Neil Mawston, a London-based analyst at research company Strategy Analytics said last week.

Samsung aims to outpace the mobile-phone market’s growth in “all segments” this year, Lee Young Hee, a vice president for the mobile business, said on a conference call today.

The company aims to increase tablet computer sales more than fivefold from 2010 and sell more than 60 million smartphones this year.

Displays

Overall operating profit, or sales minus the cost of goods sold and administrative expenses, fell 25 percent to 3.75 trillion won, in line with the company’s preliminary estimate of 3.7 trillion won. Sales rose 4.1 percent to 39.4 trillion won, in line with a preliminary estimate announced on July 7.

Samsung’s display division, which makes flat panels for televisions and computer monitors, had an operating loss of 210 billion won, compared with an 880 billion won profit a year earlier, the company said. The median estimate of five analysts was for an operating loss of 67 billion won.

Operating profit at Samsung’s TV-making unit rose to 510 billion won from 360 billion won a year ago, while sales fell 5 percent. That compares with the 180 billion won median of the five analyst estimates.

Demand for TVs will likely remain “stagnant” in advanced countries, with emerging markets to lead sales growth, Samsung said today. The company said it may reduce capital expenditure for displays and increase spending on chips instead, following its closest competitor LG Display Co.

U.S., Europe Demand

Sony Corp., the world’s third-largest TV maker, slashed its forecast yesterday for sales in the year ending March 31 by 19 percent to 22 million units on weakening demand in the U.S. and Europe.

Shipments of large-sized LCD panels will grow 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 Samsung’s semiconductor division was 1.79 trillion won, dropping from 2.94 trillion won and lagging behind the 1.98 trillion won median forecast in the survey.

“It’s getting harder to predict demand for electronics products,” UBS Hana’s Yoo said. “There are macro-economic concerns for advanced markets, and it’s not easy to be as optimistic as in the past.”

--With assistance from Saeromi Shin in Seoul. Editors: Anand Krishnamoorthy, Terje Langeland

To contact the reporter on this story: Jun Yang in Seoul at jyang180@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net


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