* Q1 operating profit 5.85 trln won vs 5.8 trln won guidance
* Handset profit at 4.27 trln won, margins jump
* Chip profits more than halved to 760 bln won
* Galaxy S 3 launch to boost earnings momentum – analysts
* Samsung shares up 2.9 pct to life high
By Miyoung Kim
SEOUL, April 27 (Reuters) – Samsung Electronics
made a record $5.2 billion profit in the first quarter,
overhauling Nokia as the world’s top mobile phone seller, and
its Galaxy smartphones outstripped Apple’s iPhone at the high
end of the market.
The South Korean group’s handset division shifted more than
20,000 Galaxy phones an hour in the quarter and contributed most
of its operating profit.
That company’s shares hit a lifetime high after the results,
pushing its market value to $190 billion, 11 times that of
Japanese rival Sony, though still only a third of
Apple’s, the world’s most valuable company.
Samsung sold 93.5 million handsets in the quarter, more than
one in every four sold, according to Strategy Analytics,
toppling Nokia from the top spot after 14 years.
The total included 44.5 million smartphones, giving Samsung
a 30.6 percent share of the high-end market. Apple’s sales of
35.1 million iPhones gave it a 24.1 percent share.
“Samsung and Apple are out-competing most major rivals, and
the smartphone market is at risk of becoming a two-horse race,”
said Neil Mawston, an analyst at Strategy Analytics.
CLSA analyst Matt Evans said in a recent report that
“Samsung’s smartphone success in the first quarter was the
flip-side of Nokia’s disappointment.”
Nokia, which had long been the leader in the smartphone
segment until last year, has suffered a sharp decline in sales
since it abandoned its own smartphone operating system and
switched to the largely untried Windows Phone. It managed to
sell only 12 million smartphones in the first quarter.
The near duopoly in high-end smartphones is unlikely to come
under much threat this year or next, according to Bernstein
analysts, and Samsung will look to keep that momentum going next
week with the launch in London of a third generation of Galaxy
S, hoping to boost sales ahead of the summer Olympics, where the
group is among the leading sponsors.
“The Galaxy S 3’s specifications are expected to be
sensational, and it’s already drawing strong interest from the
market and consumers,” said Brian Park, an analyst at Tong Yang
Securities.
The new Galaxy will be powered by Samsung’s quad-core
microprocessor, which the company hopes to see used in handsets
sold by Nokia, HTC and Motorola, as well as
Apple, its biggest customer for components.
“We anticipate very strong demand for the Galaxy S 3,”
Robert Yi, Samsung’s senior vice president and head of investor
relations, told analysts. “When there’s strong demand in the
market, we don’t necessarily need to spend a lot of marketing
dollars to promote sales.”
While Apple said this week that iPhone 4S sales boosted its
quarterly revenue in China five-fold, there are more Samsung
handsets than Apple phones in the world’s biggest mobile market.
Samsung said it increased its
China smartphone market share to just above its global average,
suggesting it took more than 30 percent share of a market where,
unlike Apple, it already has deals with all three big telecoms
operators.
Samsung’s quarterly handset division profits nearly tripled
to 4.27 trillion won ($3.8 billion), accounting for 73 percent
of total profit, and operating margins jumped to 18.4 percent
from 12 percent in the preceding quarter on strong sales of the
Galaxy S and the Note phone/tablet, the surprise consumer hit of
recent months.
MOBILE WARNING
In a sign that high-end smartphones are where the mobile
action, and money, is, Foxconn International Holdings
warned of a deepening first-half loss on weak orders. While its
Taiwanese parent assembles iPads and iPhones, Foxconn
International mainly puts together handsets for Motorola, Sony
and others, indicating a wider gulf between high-end smartphones
and other mobile devices.
Samsung, the world’s top technology firm by revenue, is also
outmuscling Japanese rivals in TVs and memory chips.
January-March operating profit nearly doubled to 5.85
trillion won and was up from 5.3 trillion won in the previous
quarter, sending Samsung shares to a life high of 1.38 million
won ($1,200). The shares closed up 2.5 percent.
Tong Yang’s Park said Samsung’s handset earnings growth may
slow later this year, with the likely third-quarter launch of
Apple’s iPhone 5, “but the recovery of chips and displays will
more than offset potential drops, sustaining earnings momentum.”
Samsung competes with Sony and LG Electronics in
TVs, Toshiba and SK hynix in chips and LG
Display in flat screens.
THE CHIPS ARE DOWN
Profits from semiconductor sales more than halved to 760
billion won, the lowest in nearly three years, hit by tumbling
computer memory chip prices. T h e division also lost some
production as Samsung converted a NAND memory chip line to
system chips to meet growing demand for mobile processors.
Samsung’s TV and home appliance business boosted profits
sharply to 530 billion won from a razor-thin 80 billion won a
year ago, as it sold more high-end models such as its
LED-backlit LCD flat-screen TVs and Internet-enabled sets.
Samsung, the world’s biggest TV maker, and local rival LG
Electronics are among the few global TV manufacturers making
money and winning market share on the back of sleek design,
crisp displays and new technologies, such as 3D and organic
light emitting display (OLED) sets. Sony, Panasonic and
Sharp, Japan’s top TV firms, expect to have lost a
combined $21 billion in the business year just ended.
Samsung will also merge its Samsung Display liquid crystal
display (LCD) unit with its OLED production unit Samsung Mobile
Display to create the world’s biggest flat-screen producer. The
new unit, which will also take in what is left of a dissolved
LCD venture with Sony, will launch in July, and Samsung hopes it
will shift focus from to OLED from LCD and maintain a lead over
Japanese rivals.
Samsung’s OLED unit contributed around 400 billion won of
profit in the first quarter, more than offsetting losses from
the LCD operation.
