Wow. What a result!
Samsung Electronics Co.’s operating profit beat estimates handsomely. That’s despite all the bad news about exploding phones, self-destructing washing machines, a slowdown in the electronics industry and all manner of other reasons why disaster should have awaited the Korean giant.
Or perhaps instead of saying despite the bad news, we should say because of it. Sell-side analysts had clearly been expecting a much worse figure, and they had good reason to be pessimistic. Those with skin in the game saw things differently: Investors have been forgiving the company to the tune of a 24 percent rally from its September low.
Exactly what’s behind the beat isn't entirely clear. Samsung released figures only for sales -- 53 trillion won ($44.6 billion) versus a 52.1 trillion won estimate for the quarter ended December -- and operating income, which came in at 9.2 trillion won against an 8.29 trillion won estimate. Yet analysts who spoke to Bloomberg News pointed to strength in its chip and display panel businesses: specifically, memory chips and advanced organic light-emitting diode screens.
Both explanations make sense since prices of DRAM chips, which are highly volatile, climbed. Competitor Micron Technology Inc. forecast strong sales and earnings back in October and again last month. The situation for OLED screens is less transparent because they aren't as commoditized as memory chips, yet Samsung still dominates that product category and demand appears quite strong even amid weakness in global smartphone and television markets.
Apart from investors who were quick to excuse Samsung for its Galaxy Note 7 and washing machine debacles, the other real winner will be Jay Y. Lee. The Samsung scion and heir apparent moved to the boardroom late last year, and almost as soon as he took his seat had to face two sets of challenges from outside: one from South Korean lawmakers amid an investigation of the nation’s president, and the other from activist investors seeking sweeping changes at the company.
Neither went smoothly, but he survived and the shares kept rising. In delivering earnings that surpassed expectations, Lee gets to chalk up a win at a time he really needed it. No one will think he is the sole reason for these stronger numbers, but they do help him push back against notions -- verbalized or not -- that Samsung is in trouble and that he doesn’t have what it takes to lead.
That means for once, both Lee and investors are winners.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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Tim Culpan in Taipei at firstname.lastname@example.org
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