Monday 18 June 2018

Samsung says Q3 to top forecast as phones boom

Seoul, October 7, 2011

Samsung Electronics said its quarterly profit should top the most bullish market forecasts, with smartphones becoming its main profit engine despite intense competition from bigger rival Apple.

Indeed, analysts expect Samsung to report record profit from handset sales in the third quarter and overtake Apple as the world's biggest smartphone vendor in unit terms.

The South Korean firm estimated its quarterly operating profit at 4.2 trillion won ($3.5 billion) versus a consensus forecast of 3.4 trillion won by analysts surveyed by Thomson Reuters I/B/E/S. That would be down 14 per cent from a year ago but up 12 per cent from the preceding quarter.

The estimate released on Friday was higher than even the most bullish street view of 3.95 trillion won. Detailed earnings for July to September will be released later this month, Samsung said.

"Samsung's estimates are far better than expected," said Park Jong-min, a fund manager at ING Investment Management. "Its telecommunications business is seen very positive as shipments of smartphones and other high-end handsets expanded."

Investors are looking for signs the telecoms business can sustain strong growth for the year-end holiday season as its flagship Galaxy line of smartphones and tablets squares off against Apple's new iPhone, which goes on sale next week.

Stellar growth and strong profit margins from its telecom business mark a big transformation for a company, which has relied for years on its mainstay computer memory chips to boost profit. It had a negligible share of the smartphone market until early last year.

Samsung shares held steady on Friday, while the broader market rose 2.6 per cent, an underperformance that analysts blamed on the prospects for a tougher fourth quarter owing to weak prices for memory chips and flat screens. However, Samsung shares had risen sharply in September as the wider market fell.

Earnings at the world's biggest technology firm with sales of $130 billion last year, are set to slide to 3.4 trillion won in the fourth quarter, consensus estimates show.

Profit from Samsung's telecoms division is widely expected to top earnings from the semiconductor business at the world's biggest memory chip maker.

Analysts say Samsung is one of the best placed companies to deliver something fresh and exciting to rival Apple, which has released a string of big-hit products in the past two decades.      It already makes the closest competing tablet by sales to Apple's iPad.

Samsung sold 19 million smartphones in the second quarter and shipments are expected by analysts to have risen to more than 28 million units in the third quarter compared to the 60 million units Samsung is targeting for 2011.

Samsung sold about 1 million fewer smartphones than Apple in the second quarter.

It plans to release its first smartphone based on the latest version of Microsoft's mobile operating system this month, while a 5.3-inch screen Galaxy Note, a hybrid of a smartphone and a tablet, is set to go on sale later this year.

Samsung leads a pack of companies selling phones on Google's  Android operating system.

"The Galaxy S II probably played a key role in boosting the company's earnings and it will continue to do so pretty much unchallenged, until Apple unveils a better new version of iPhone," said Kyung Woo-hyun, a fund manager at Daishin Asset Management.

Samsung, which worked out how to make black and white TVs in the 1970s by tearing apart Japanese models, has become a top global brand over the past decade.

It boasts a market value of $118 billion, much bigger than the combined value of Sony Corp , Nokia , Research In Motion , Toshiba and Panasonic.

Samsung's shares have fallen 5 per cent over the past three months versus a 12 per cent drop in Apple's shares. – Reuters

Tags: Samsung | profit | Phones | Seoul | Third quarter |

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