Bloomberg News

Samsung Phone Sales Rise to Record, Mask Slumps in Chips, TVs

October 27, 2011

Oct. 28 (Bloomberg) -- Samsung Electronics Co., competing with Apple Inc. for leadership in smartphone sales, had record profit and sales at its handsets division, helping mask a slump in earnings from computer-memory chips and panels.

The handset business had an operating profit of 2.52 trillion won ($2.3 billion) in the three months ended Sept. 30, Suwon, South Korea-based Samsung said in a statement today. That helped the company post 3.44 trillion won net income in the quarter, matching the 3.4 trillion won average of 25 analysts’ estimates compiled by Bloomberg.

The introduction of new phones that compete with Apple’s iPhone will help mitigate falling profits at the display and chip units in the coming quarters, said Koo Ja Woo, an analyst at Kyobo Securities Co. Samsung, which uses Google Inc.’s Android software, overtook Apple in smartphone sales in the quarter, according to estimates by brokerages including JP Morgan Chase & Co.

“Samsung’s handset business is on a solid footing,” said Yoo Byung Ok, a Seoul-based fund manager at UBS Hana Asset Management Co. “Their device is on par with Apple, and they have succeeded in positioning themselves as the leader in the Android camp. It’s hard to find downside risks to the stock.”

Samsung gained as much as 2.4 percent to 946,000 won in Seoul after the earnings announcement. They changed hands up 1.3 percent at 10:07 a.m., helping trim the losses this year to 1.3 percent. The benchmark Kospi index has declined 4.7 percent.

Samsung vs. Apple

Handset shipments rose “high-20 percent” in the third quarter from a year ago, Samsung said without disclosing a specific figure. The company probably sold about 29 million smartphones in the third quarter, according to estimates by JPMorgan Chase & Co. and Bank of America Corp. Apple sold about 17 million iPhones in the quarter ended Sept. 24, the Cupertino, California-based company said Oct. 18.

Samsung expanded its smartphone market share to become Apple’s closest competitor earlier this year, helped by the popularity of Android-powered Galaxy devices, according to Strategy Analytics. Global smartphone shipments expanded 76 percent in that quarter, the research company said.

Samsung and Apple have been involved in multiple court cases worldwide since Apple claimed in an April lawsuit filed in the U.S. that the Galaxy devices “slavishly” copied the iPhone and iPad.

Semiconductors

Companywide operating income, or sales minus the cost of goods sold and administrative expenses, fell 13 percent to 4.25 trillion won, in line with the company’s preliminary estimate of 4.2 trillion won.

Profit at the semiconductor division fell 53 percent to 1.59 trillion won on sales of 9.48 trillion won. Analysts estimated a profit of 1.46 trillion won.

The price of the benchmark DDR3 2-gigabit DRAM has slumped more than 70 percent in the past 12 months, according to data from Taipei-based Dramexchange Technology Inc., operator of Asia’s largest spot market for semiconductors. DRAM chips are used in personal computers to help run multiple programs simultaneously.

Global personal-computer shipments will rise 3.8 percent in 2011, less than a previous projection of 9.3 percent, Stamford, Connecticut-based Gartner Inc. said Sept. 8.

The display division, which makes flat panels for TVs and computer monitors, had an operating loss of 90 billion won, compared with a 520 billion profit a year earlier. Sales fell 13 percent to 7.08 trillion won. Analysts predicted a loss of 144.5 billion won.

The average price of Samsung’s liquid-crystal displays for televisions probably fell about 25 percent in the third quarter from a year earlier, Hana Daetoo Securities Co. said in September.

The TV unit posted an operating profit of 240 billion won, compared with a loss of 250 billion won a year earlier, helped by models featuring 3-D functionality and Web-based services. Analysts expected a profit of 330 billion won.

Sales fell 0.4 percent to 14.36 trillion won.

--Editors: Lena Lee, Anand Krishnamoorthy.

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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