Samsung Rises to Record as Smartphones Help Keep Pace With Apple

Samsung Profit Rises as Phone Sales Mask Slump in LCD Panels
A visitor tries a Samsung Electronics Co. Galaxy Tab tablet device in front of light-emitting diode (LED) televisions at the company's Galaxy Zone showroom in Seoul, South Korea. Photographer: Chiho Jeong/Bloomberg

Samsung Electronics Co. jumped to a record in Seoul trading after surging smartphone sales boosted profit and helped Asia’s largest consumer-electronics company keep pace with Apple Inc.

Fourth-quarter net income rose 17 percent to 4 trillion won ($3.6 billion), from 3.42 trillion won a year earlier, the Suwon, South Korea-based company said in a statement today. The average of 28 analyst estimates compiled by Bloomberg was 3.99 trillion won. Sales rose 13 percent to 47.3 trillion won, in line with a preliminary estimate announced Jan. 6.

Samsung shipped more smartphones last year than Apple did iPhones, with the popularity of its Galaxy models helping the Korean company sell a record 300 million handsets. Samsung, whose parent group plans a record investment this year, is introducing more phones and tablet computers to cushion slumping profits at its liquid-crystal display business amid a global economic slowdown.

“They have such a good product line from top to bottom,” said Kim Chang Yeul, a Seoul-based analyst at Mirae Asset Securities. “The economic slowdown won’t be much of an issue for their phone sales. Only Samsung and Apple phones are selling these days.”

Smartphone Sales

Operating profit was 5.3 trillion won, in line with the company’s preliminary estimate of 5.2 trillion won. Full-year net income fell 15 percent to 13.7 trillion won, while sales climbed 6.7 percent to a record 165 trillion won.

Samsung rose 1.1 percent to a record 1,125,000 won at the close in Seoul trading, and was the main contributor to the benchmark Kospi index’s 0.4 percent gain. The stock has gained 13 percent in the past 12 months, while the Kospi has lost 7.1 percent.

Samsung was the top smartphone seller in 2011, more than doubling its market share to 19.9 percent, though Apple sold more handsets in the fourth quarter, Strategy Analytics said today.

Apple had a 19 percent share last year after selling 37 million iPhones in the three months ending in December, compared with Samsung’s 36.5 million. Apple said this week that its quarterly profit more than doubled to $13.1 billion.

Sales Quadrupled

Samsung’s smartphone sales in 2011 more than quadrupled from the year before, according to Boston-based Strategy Analytics, generating record operating profit and revenue at the telecommunications division. Profit at the business jumped 79 percent to 2.64 trillion won in the fourth quarter.

The company plans to offer more phones and tablets this year and is reviewing “various options” for deciding when to unveil the next version of its best-selling Galaxy phone, Lee Young Hee, a senior vice president at the telecommunications business, said on a conference call today.

Sales of the Galaxy S II, which began in May, surpassed 10 million units quicker than any other Samsung mobile device, the company said in December. The phones use Google Inc.’s Android operating system.

“In smartphones, the whole competition boils down to Apple and Samsung now,” said Lee Jin Woo, a fund manager at Seoul-based KTB Asset Management Co.

Capital Expenditures

Samsung will spend 25 trillion won this year in capital expenditures, including 15 trillion won in the chip business and 6.6 trillion won in the panel business, as it seeks to widen its lead over rivals.

Profit at the semiconductor division rose 29 percent to 2.31 trillion won on sales of 9.17 trillion won. The unit’s operating profit compares with the 1.6 trillion-won median of the four analyst estimates.

“We have strong momentum going into 2012,” Robert Yi, senior vice president for investor relations, said today.

Samsung is faring better than its rivals amid an industry downturn because of its diversification into specialty chips for mobile devices, analysts said. Shipments of smartphone DRAM probably more than doubled last year from 2010, according to an October forecast by researcher IHS iSuppli.

The price of the benchmark DDR3 2-gigabit DRAM slumped by 51 percent last year amid slowing personal-computer sales, according to data from Taipei-based Dramexchange Technology Inc., operator of Asia’s largest spot market for semiconductors.

Panel Losses

PC shipments in the U.S. declined for the first time in a decade last year, research firm IDC said Jan. 11.

Samsung’s display division, which makes flat panels for TVs and computer monitors, had an operating loss of 220 billion won, compared with an operating profit of 100 billion won a year earlier, the company said. Revenue climbed 19 percent to 8.55 trillion won.

The average selling price of Samsung’s flat-screen panels dropped 21 percent in 2011 amid stagnating TV sales, according to an estimate from Dongbu Securities.

Global LCD TV shipments probably were 206 million units last year, falling short of an earlier projection of 211 million units, according to research company DisplaySearch. LG Display Co., Samsung’s closest competitor in flat panels, today reported a fourth-quarter loss of 6.3 billion won.

Samsung bought Sony Corp.’s stake in their LCD-making venture, which was formed in 2004, for 1.08 trillion won in cash, the South Korean company said in December. Sony has predicted an eighth consecutive year of losses from TVs.

Samsung’s TV-making unit had an operating profit of 570 billion won, compared with a loss of 200 billion won a year earlier, helped by high-end models featuring 3-D functionality and Web-based services, the company said. Sales rose to 16.96 trillion won from 16.33 trillion won.

The company unveiled new sets controlled by voice commands and hand gestures at the Consumer Electronics Show in Las Vegas this month.

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