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Samsung Profit Beats Estimates as Galaxy Smartphones Challenge Apple, HTC

Samsung Electronics Co., the world’s second-largest maker of mobile phones, reported profit that beat analysts’ estimates as demand for Galaxy smartphones outweighed slumping sales of displays and semiconductors.

Operating profit in the three months ended September was 4.2 trillion won ($3.6 billion), the Suwon, South Korea-based company said in a statement today, more than the 3.7 trillion won average of 28 analysts’ estimates compiled by Bloomberg. The company had a profit of 4.86 trillion won a year earlier.

Samsung joins HTC Corp. (2498) in benefiting from the popularity of mobile devices running Google Inc.’s Android software. The gains in smartphones, where Samsung is second only to Apple Inc. (AAPL), helped offset falling profit from the biggest business of selling memory chips and flat-screen panels.

“I’m quite amazed,” said Lee Seung Woo, a Seoul-based analyst at Shinyoung Securities Co. “It seems like there was a big surprise on the smartphone side.”

Samsung rose 0.6 percent to 860,000 won at the 3 p.m. close of trading in Seoul, after earlier climbing as much as 3 percent. The benchmark Kospi index gained 2.9 percent.

Operating profit may be 200 billion won higher or lower than today’s preliminary estimate when audited results are announced later this month, Samsung said. The company didn’t provide net income figures and a breakdown of divisional earnings. Sales rose 1.9 percent to 41 trillion won.

Mobile Business

Profit at the telecommunications unit likely jumped 76 percent to 1.99 trillion won, according to a Bloomberg News survey of six analysts. Sales at the division may have gained 28 percent to 14.21 trillion won.

The company, which aims to sell more than 60 million smartphones this year, probably shipped half of that in the third quarter, Shinyoung’s Lee said.

Samsung will likely meet its target to sell more than 300 million handsets this year, including basic models, J.K. Shin, head of Samsung’s mobile-phone division, said Sept. 26.

The South Korean company’s sales accelerated from the second quarter after it began selling the Galaxy S II, a successor to its best-selling Android device introduced last year to counter Apple’s iPhone. The latest 4.27-inch model was unveiled in February.

The company has rolled out a new version of the Galaxy S II that supports faster fourth-generation networks using the long- term evolution, or LTE, technology, a feature lacking in the latest iPhone.

Photographer: SeongJoon Cho/Bloomberg

The South Korean company’s sales accelerated from the second quarter after it began selling the Galaxy S II , a successor to its best-selling Android device introduced last year to counter Apple’s iPhone. Close

The South Korean company’s sales accelerated from the second quarter after it began... Read More

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Photographer: SeongJoon Cho/Bloomberg

The South Korean company’s sales accelerated from the second quarter after it began selling the Galaxy S II , a successor to its best-selling Android device introduced last year to counter Apple’s iPhone.

Chip Profit Drops

Profit at the semiconductor division, Samsung’s biggest business by revenue last year, probably fell 63 percent to 1.26 trillion won from a year ago, according to the median of a survey of six analysts by Bloomberg News. Sales may have fallen to 8.98 trillion won from 10.66 trillion won.

Weakening demand for computer-memory chips also hurt Micron Technology Inc. (MU), the largest U.S. maker of the product used in personal computers. On Sept. 29, Micron reported a net loss of $135 million for the fiscal fourth quarter.

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.

No Rebound

There won’t likely be “a drastic rebound” in prices for chips used in personal computers, Kwon Oh Hyun, head of the company’s chip division, said in an e-mail interview on Sept. 29. The company’s chip business is “on track” with the capital expenditure plan for 2011, he said without elaborating.

Global personal-computer shipments will rise 3.8 percent to 364 million units in 2011, compared with an earlier projection of 9.3 percent, research firm Gartner Inc. said on Sept. 8. Shipments will probably increase 10.9 percent in 2012, the Stamford, Connecticut-based company said.

Samsung, which controls about 40 percent of the DRAM market, last month began operations at a new 12-trillion won factory, the largest in the industry, in Hwaseong, outside Seoul.

LCD, TVs

Samsung’s display division likely had an operating loss of 200 billion won, compared with 520 billion won profit a year earlier as TV sales fell amid an economic slowdown, according to the survey of analysts. The loss would be the company’s third in as many quarters.

The average price of Samsung’s LCD displays for televisions probably fell about 25 percent in the third quarter, according to Hana Daetoo Securities Co. estimates.

Samsung’s TV-making unit likely had an operating profit of 359.5 billion won from a loss of 230 billion won a year ago, helped by models featuring 3-D functionality and Web-based services, according to the survey. Sales at the unit probably rose to 14.92 trillion won from 14.13 trillion won, it said.

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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