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Samsung Names Lee as Vice Chairman in Succession Plan

Samsung Electronics Chief Operating Officer Jae Yong "Jay" Lee arrives at the Allen & Company Sun Valley Conference in Sun Valley, Idaho, on July 13, 2012. Photograph: Paul Sakuma/AP Photo Close

Samsung Electronics Chief Operating Officer Jae Yong "Jay" Lee arrives at the Allen &... Read More

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Samsung Electronics Chief Operating Officer Jae Yong "Jay" Lee arrives at the Allen & Company Sun Valley Conference in Sun Valley, Idaho, on July 13, 2012. Photograph: Paul Sakuma/AP Photo

Samsung Electronics Co. (005930) promoted Lee Jae Yong to vice chairman, putting him a step closer to succeeding his father as leader of the world’s biggest maker of televisions and mobile phones. The shares rose to a record.

The elevation from president and chief operating officer rewards Lee for helping oversee Samsung’s “unprecedented growth” in those businesses, the Suwon, South Korea-based company said in an e-mailed statement today announcing its annual leadership shuffle.

The appointment puts the 44-year-old Lee in line to take over from his billionaire father Lee Kun Hee, who transformed the former fish exporter into Asia’s biggest consumer- electronics company and helped the stock surge more than 100- fold in his 25 years as chairman. The younger Lee will seek to retain the company’s dominance in TVs while challenging key customer, rival and legal adversary Apple Inc. (AAPL) for supremacy in the $219 billion global smartphone market.

“The promotion strengthens Lee’s powers in dealing with Apple, both in the legal fight and in operations,” said James Song, an analyst at Daewoo Securities Co. in Seoul. “Lee will continue to make efforts to solidify the company’s position in areas where it’s already performing well, rather than taking bold actions on new growth business.”

Customer Relationships

Samsung shares rose 1.8 percent to a record 1,455,000 won at the close of trading in Seoul, extending their gains this year to 38 percent. With a market capitalization of $198 billion, Samsung is the world’s 15th most-valued company, according to data compiled by Bloomberg. Apple is the most- valuable company at $542 billion.

The younger Lee, who studied at Japan’s Keio University, joined Samsung Electronics in 1991. His roles included chief customer officer and vice president at the strategic planning division. He was promoted to executive vice president and chief operating officer in December 2009, and a year later was named president.

“As Vice Chairman, Mr. Lee will build on his existing responsibilities and take a broader role in managing Samsung Electronics’ businesses,” the company said in the statement. “Mr. Lee will continue to play a critical role in transforming Samsung’s business model -- the set business into one based on a platform and the component business into a total solution provider.”

Samsung Electronics is the flagship company in South Korea’s biggest industrial group, which generates about 20 percent of the nation’s gross domestic product. Under Lee Kun Hee, 70, who took over for his father -- the group’s founder -- as chairman in 1987, Samsung surpassed the market values of Hewlett-Packard Co. (HPQ), Sony Corp. (6758) and Toyota Motor Corp.

Family Dispute

Lee Kun Hee also ended Nokia Oyj (NOK1V)’s 14-year run as the world’s biggest mobile-phone maker. Samsung shipped about one in every four mobile phones in the third quarter of this year, according to researcher IDC.

The elder Lee, a lung cancer survivor, is facing lawsuits filed by his older brother and sister in an attempt to win a slice of the family wealth. He’s worth $10.7 billion as his wealth increased 34 percent this year, according to the Bloomberg Billionaires Index.

His son owns more than $1 billion of Samsung Electronics stock, according to data compiled by Bloomberg.

Lee Byung Chul, who founded the group in 1938, died in 1987 without leaving a will.

The siblings’ demand for at least an $850 million stake in the group threatens to be a costly distraction at a time of intense industry competition. The civil trial started in May.

Apple, Sony

The younger Lee’s promotion comes as Samsung Electronics challenges Cupertino, California-based Apple, its biggest customer and an adversary in patent lawsuits on four continents. Samsung earned 7.64 percent of its revenue from selling chips, displays and other products to the iPhone maker.

Samsung reported record profit in the three months ended Sept. 30 amid surging sales of its Galaxy smartphone. More than two-thirds of the earnings were generated by the telecommunications business, according to the company.

The company sells one in four flat-panel TVs worldwide, according to data from DisplaySearch. Korean rival LG Electronics Inc. was second and Sony third in the quarter ended in September.

Samsung shipped 56.9 million smartphones in the third quarter, giving it a record 35 percent market share, compared with 17 percent for Apple, Strategy Analytics said in October. In overall handset sales, including basic types, Samsung remained the top seller, researcher IDC said separately.

Patent Battle

Apple and Samsung are battling in court over patents protecting their devices, with each accusing the other of copying their intellectual property. The companies have traded victories, with Apple winning more than $1 billion in damages Aug. 24 after a jury in San Jose, California, ruled that the South Korean company infringed six of seven patents.

Samsung is attempting to get the verdict thrown out based on claims the trial was tainted.

In addition to Lee’s promotion, Samsung named Kim Kinam president and chief executive officer of Samsung Display Co., according to the statement. Cho Soo In was appointed head of the company’s medical equipment business, and Park Dae Young was promoted to president and CEO of Samsung Heavy Industries Co., the world’s second-largest shipyard.

To contact the reporter on this story: Jungah Lee in Seoul at Jlee1361@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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