Samsung Profit Exceeds Estimates on Smartphone, TV Demand

Samsung Electronics Co. (005930), Asia’s largest consumer-electronics maker, posted first-quarter profit that beat analyst estimates as gains from selling phones and TVs helped mask a slump in earnings at the chip business.

Operating profit rose to a quarterly record 5.8 trillion won ($5.1 billion) in the three months ended March 31 from 2.95 trillion won a year earlier, the Suwon, South Korea-based company said in a statement today. That surpassed the 5 trillion won average of 32 analyst estimates compiled by Bloomberg.

Profit at the mobile-phone business probably more than doubled in the quarter from a year earlier after Samsung introduced the Galaxy Note and new smartphones to compete with Apple Inc. (AAPL), a key customer that it’s also fighting in a patent battle on four continents. Samsung is also bringing out 3-D and Internet-enabled TVs to counter falling chip prices that are eroding earnings at the semiconductor unit.

“Sales of new models of smartphones, such as the Note, were better than expected,” James Song, a Seoul-based analyst at Daewoo Securities Co., said by phone today. “They have a good line-up of new products, so they will be able to keep the momentum alive for two or three quarters, at least.”

Samsung rose 0.2 percent to 1,332,000 won on the Korea Exchange at the close of trading. The benchmark Kospi index was little changed. The shares have gained 26 percent this year.

Galaxy Phones

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

First-quarter sales jumped 22 percent to 45 trillion won.

Operating profit at the telecommunications unit more than doubled to 3.5 trillion won, according to the median estimate of six analysts surveyed by Bloomberg News. Sales are estimated to have gained 75 percent to 18.6 trillion won.

Samsung probably sold 44 million smartphones in the first quarter, more than tripling from a year earlier, Matt Evans, a Seoul-based analyst at CLSA Asia-Pacific Markets, said in an April 2 report. That would exceed Apple’s shipments “by a significant margin,” making Samsung the top smartphone seller during the three-month period, according to the report.

The maker of Galaxy devices aims to double sales of smartphones and tablet computers this year, helped by new products, the company said in a statement in February. Including basic phones, Samsung expects to sell about 380 million handsets this year, after shipping a record 300 million units last year.

Photographer: David Paul Morris/Bloomberg

The Samsung Electronics Co. OLED television at the International Consumer Electronics Show (CES) in Las Vegas on Jan. 13, 2012. Close

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Photographer: David Paul Morris/Bloomberg

The Samsung Electronics Co. OLED television at the International Consumer Electronics Show (CES) in Las Vegas on Jan. 13, 2012.

Samsung Versus Apple

Global sales of the Galaxy S II reached 20 million in about 10 months since it went on sale, about seven months faster than shipments of its predecessor, Samsung said in February. The Galaxy phones and tablets compete with Apple’s iPhone and iPad.

The company sold more than 5 million units of the Galaxy Note, equipped with a 5.3-inch screen and a stylus, since sales began in October. Samsung expects to sell 10 million units of the model by the end of this year and plans to introduce more pen-equipped products with different screen sizes.

Samsung and Apple have been suing each other in the past year regarding patent-infringement claims related to mobile technology and design. Apple is Samsung’s biggest customer, buying chips and displays from the Korean company.

Chip Prices

Profit at the semiconductor division probably fell 28 percent to 1.2 trillion won on sales of 8.65 trillion won, according to the Bloomberg News survey.

The price of the benchmark DDR3 2-gigabit DRAM (DRAM84) closed at $1 on April 2, compared with $2.10 a year earlier, according to data from Taipei-based Dramexchange Technology Inc., operator of Asia’s largest spot market for semiconductors. Falling chip prices pushed Elpida Memory Inc. to file for bankruptcy earlier this year, while Micron Technology Inc. (MU) reported a third consecutive quarterly loss in March.

Memory-chip demand slowed in the first quarter as hard-disk drive output didn’t recover as fast as expected after floods in Thailand, a key production site, Choi Sung Jae, a Seoul-based analyst at SK Securities Co., said in a March 30 report.

Elpida’s bankruptcy will probably prompt major chip buyers, including Apple, Dell Inc. and Hewlett-Packard Co. (HPQ), to seek alternative suppliers, helping boost prices in the second quarter, Choi wrote.

LCDs, TVs

Samsung plans to invest $7 billion to build a factory in China, producing NAND flash, a different type of memory widely used in smartphones and tablet computers.

Samsung’s display division probably had an operating profit of 164.5 billion won, compared with a loss of 230 billion won a year earlier, according to the Bloomberg News survey. Sales probably rose to 8.25 trillion won from 6.51 trillion won.

While liquid-crystal-display prices were suppressed by slowing TV demand, panels used in mobile devices such as phones and tablets helped boost earnings, Choi at SK said. Samsung supplies Apple with screens used in the latest iPad, according to research company IHS Inc.’s iSuppli. Samsung spun off the LCD business on April 1.

Last year, global TV shipments fell for the first time since 2004, according to DisplaySearch, part of NPD Group. Flat- screen TV shipments in the U.S. may fall for the first time this year, to 37.1 million units from 39.1 million in 2011, according to iSuppli.

Samsung’s TV-making unit probably had an operating profit of 418 billion won, compared with 100 billion won a year ago, helped by high-end models featuring 3-D functionality and Web- based services, according to the survey. Sales are estimated to have risen to 14.3 trillion won from 13.5 trillion won.

Samsung had a record market share in the U.S. LCD TV market in the fourth quarter, accounting for about 25 percent of total shipments, helped by a wide range of models and features, iSuppli said this month.

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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