Samsung Profit Falls More Than Estimated After Television Prices Decline
Samsung Profit Misses Analysts’ Estimates on TVs, LCDs
Michele Tantussi/Bloomberg
Samsung Electronics Co., the world’s largest maker of televisions and flat screens, posted a steeper profit decline than analysts estimated after TV prices dropped during the year-end shopping season.
Samsung Electronics Co., the world’s largest maker of televisions and flat screens, posted a steeper profit decline than analysts estimated after TV prices dropped during the year-end shopping season. Photographer: Michele Tantussi/Bloomberg
Samsung Electronics Co., the world’s largest maker of televisions, posted a bigger than estimated decline in profit in the fourth quarter, stoking concerns a drop in TV prices will worsen this year and damp earnings.
Operating income fell 13 percent from a year earlier to 3 trillion won ($2.7 billion) in the three months ended December, the Suwon, South Korea-based company said today. The preliminary results lagged behind the 3.3 trillion won average of 13 analyst estimates compiled by Bloomberg in the past 28 days.
Samsung led shares of electronics companies lower in Asian trading after reporting its lowest operating profit in more than a year because of losses at the TV business, analysts said. Samsung may have to brace for lower prices again in 2011 as new technologies such as 3-D and Web-based models have yet to convince consumers to replace their old sets, said Seoul-based fund manager Song Seong Yeob.
“There has to be demand from consumers,” said Song, a fund manager at KB Asset Management Co. “People won’t buy new products unless there is a very innovative device, which we don’t see in the market now.”
Samsung dropped as much as 1.7 percent to 914,000 won, its lowest intraday level on the Korea Exchange since Dec. 20. The stock traded at 918,000 won, down 1.3 percent, at 12:11 a.m. in Seoul, while the benchmark Kospi index was little changed.
TV Earnings
Operating profit may be 200 billion won higher or lower than today’s estimate when audited results are announced later this month, Samsung said in the statement. The company didn’t provide net income nor a breakdown of divisional earnings.
Profit at Samsung’s display unit likely fell to 214 billion won from 530 billion won amid falling prices, while its TV division posted a loss of 47 billion won, according to a survey of six analysts by Bloomberg News.
The TV division generated 15.1 trillion won in sales in the fourth quarter, compared with 14.7 trillion won a year earlier, according to the survey.
The loss at the TV unit likely resulted from price discounts and marketing costs amid intensifying competition, Kim Chang Yuel, a Seoul-based analyst at Mirae Asset Securities Co. said in a note after today’s announcement.
Samsung aims to increase flat-screen TV sales by 15 percent to 45 million units this year, Yoon Boo Keun, head of the digital media division, told reporters on Dec. 23, ahead of the Consumer Electronics Show in Las Vegas this week.
Galaxy Target
The target includes as many as 10 million sets with 3D capabilities after the company sold about 2 million 3D TVs last year. Samsung plans to include 3D features in a wider range of models this year to offer cheaper products and boost sales.
“They’re putting a big push on 3-D TVs, because they have better margins,” Lee Min Hee, an analyst at Dongbu Securities Co. in Seoul. “They talk about selling 10 million sets, but it’s too aggressive because there is not enough 3-D content.”
Profit at Samsung’s mobile-phone division was forecast to be about 1 trillion won in the quarter, little changed from the 990 billion won a year earlier, according to the survey.
Samsung met its target to sell 10 million units of the Galaxy smartphone last year, the company said Jan. 3. Samsung will probably be able to ship 61 million smartphones this year, Goldman Sachs Group Inc. said in a report on Dec. 13.
Google Inc. and Samsung introduced the Nexus S, the first smartphone to use a new version of the Android operating system, last month. The company’s earnings will get a further boost from tablet computers this year, with 8.8 million units forecast to be shipped, according to Goldman Sachs.
Chip Prices
Samsung unveiled the Galaxy Tab tablet computer in September to compete with Apple’s iPad and tap into the surging market for the hand-held devices. The company plans to introduce more tablet computers this year, J.K. Shin, head of Samsung’s mobile-communications division, said in November.
Sales of smartphones and tablet computers will probably grow to about 1 billion units by 2015 from 300 million last year, according to Meritz Securities Co.
Fourth-quarter profit at the semiconductor unit probably was 2.3 trillion won, compared with 1.7 trillion won a year ago, according to the survey.
The price of the benchmark DDR3 1-gigabit DRAM fell about 60 percent last year amid weak demand for personal computers, according to data from Taipei-based Dramexchange Technology Inc. Memory chip prices may start rising again in the first quarter as computer manufacturers restock parts before rolling out new models featuring Intel Corp.’s latest chip design, according to Kim Young Chan, an analyst at Shinhan Investment Corp. in Seoul.
DRAM chips are used to store data temporarily to help devices run multiple programs at the same time, while NAND flash memory saves songs and pictures in consumer gadgets such as smartphones, MP3 players and digital cameras.
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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