Samsung Shares Fall After Quarterly Sales Miss Estimates

Samsung Electronics Co., the world’s largest maker of televisions and mobile phones, fell in Seoul trading after second-quarter sales missed estimates, fanning concern that Europe’s debt crisis is dragging on demand.

Samsung dropped 2 percent to 1,161,000 won at the close of trading in Seoul, compared with a 0.9 percent decline in the benchmark Kospi index. The South Korean company was the biggest contributor to the decline on the MSCI Asia-Pacific Index today.

Sales of 47 trillion won ($41 billion) trailed the 49.8 trillion-won average of 35 analyst estimates compiled by Bloomberg, overshadowing operating profit that rose to a record. The European Central Bank cut its benchmark interest rate to a record low yesterday and China also reduced borrowing costs, adding to signs that global electronics demand may weaken.

“Samsung’s earnings will likely peak in the third quarter,” Lim Dori, an analyst at Shinyoung Securities Co. in Seoul, said today. “There are concerns about the macro economy.”

Asian stocks fell for a second day, paring this week’s gain on the regional benchmark index, as the interest-rate cuts in Europe and China failed to assure investors the moves will be enough to boost economic growth.

Samsung’s second-quarter operating profit rose 79 percent from a year earlier to 6.7 trillion won, the Suwon-based company said in a statement today. The average of 32 analysts’ estimates compiled by Bloomberg was 6.58 trillion won.

Smartphone Shipments

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 for the quarter or divisional earnings.

Earnings at the telecommunications business more than doubled to 4.42 trillion won from 1.67 trillion won, according to the median of six analysts’ estimates compiled by Bloomberg News. Sales probably almost doubled to 24.1 trillion won, according to the survey.

Samsung likely shipped 50 million smartphones in the second quarter, Matt Evans, a Seoul-based analyst at CLSA Asia-Pacific Markets, said in a June 20 report. He cut his estimate from 53.4 million units, citing lower-than-expected sales of cheaper models in emerging markets, and competition from Huawei Technologies Co. and ZTE Corp.

Galaxy S III

Shipments of the Galaxy S III, the latest version of Samsung’s best-selling smartphone line-up, probably totaled 7 million units by the end of June since the model went on sale the previous month, Song Myung Sup, a Seoul-based analyst at HI Investment & Securities Co., said in a June 27 report.

That was fewer than expected as production was hampered by a shortage of components such as chips and cases, he wrote.

Samsung is unable to keep up with demand for the new phone and doesn’t have trouble sourcing parts, the company said in an e-mailed statement on June 28. A delay in shipments in the U.S. is a “temporary situation,” according to the statement.

The Korean company overtook Nokia Oyj as the world’s largest handset maker for the first time and regained the lead in smartphones from Apple Inc. in the first quarter.

Samsung has been fighting patent battles related to mobile-phone technology and design for more than a year with Apple, also the South Korean company’s largest customer. Apple won a U.S. court order on June 29 to block sales of Samsung’s Galaxy Nexus smartphone, the first smartphone to use Google Inc.’s Android 4.0 operating system.

Chip Prices

Profit at the semiconductor division fell 29 percent to 1.3 trillion won amid a decline in global personal-computer demand, according to the Bloomberg News survey.

The price of the benchmark DDR3 2-gigabit DRAM averaged $1.03 in the last quarter, compared with $1.82 a year earlier, according to data compiled by Bloomberg.

The price drop pushed Elpida Memory Inc. to file for Japan’s biggest bankruptcy in two years in February. Earlier this week, Micron Technology Inc. agreed to buy the bankrupt chipmaker to double its market share after four consecutive quarters of losses.

Manufacturers of DRAM, used in PCs to help multiple applications run smoothly, may slow output increases in the third quarter, helping boost prices, HI’s Song said in his June 27 report.

New Plant

Samsung, the exclusive manufacturer of Apple-designed chips powering the iPhone and the iPad, has been diversifying away from PC DRAM to more profitable semiconductor products used in mobile devices and servers to beat downturns in the computer-memory industry.

Last month, the company said it plans to spend 2.25 trillion won to build a new plant making mobile-phone processors. Samsung plans to spend 15 trillion won on the semiconductor business this year.

Samsung’s display business had an operating profit of 525 billion won, compared with a loss of 210 billion won a year earlier, according to the survey.

While flat-screen TV sales aren’t picking up, the company is benefiting from demand for displays used in mobile devices. Operating profit at the unit making panels for smartphones including Samsung’s own Galaxy models more than tripled in the second quarter, accounting for 86 percent of earnings at the display business, according to IBK Securities Co. estimates.

Global TV Shipments

Global TV shipments fell for the first time since 2004 last year, according to DisplaySearch, part of NPD Group. Worldwide TV shipments fell about 8 percent in the first quarter as sales of liquid-crystal-display models dropped on an annual basis for the first time, the research company said on June 20.

Samsung’s consumer-electronics business, which includes TV operations, probably boosted operating profit to 580 billion won from 510 billion won a year earlier, according to the survey.

“Chips and display businesses will also recover,” said Park Jong Min, a portfolio manager at ING Investment Management Korea Ltd., which oversees about $17 billion. “It will be more gradual because demand growth is limited with the global economy slowing down.”

Following is a table showing median operating-profit estimates for the four main business divisions of Samsung. The estimates are in billions of won and (-) indicates a loss.

DIVISION 2Q 2012 2Q 2011

Chip 1266 1790 LCD 525 -210 Phone 4421 1670 TV 580 510
(Updates with closing share price in second paragraph.)
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