Samsung to Use $39 Billion Cash for More Deals in Growth Chase

Samsung Electronics Co., holding $39 billion in net cash, will pursue more deals as Asia’s biggest technology company seeks to grow beyond its core consumer electronics amid fears those businesses are nearing saturation.

The maker of Galaxy smartphones will be more aggressive in making deals after spending about $1 billion investing in 14 companies since 2010, Chief Financial Officer Lee Sang Hoon told a briefing in Seoul today. The company also is considering setting its dividend at 1 percent of its average stock price, a move that could double its cash payout to investors.

The biggest maker of smartphones, televisions and memory chips held its first analyst briefing with top management since 2005 amid concern those segments are peaking as low-cost Chinese producers undercut prices. Samsung shares face their first annual decline in five years as the company becomes more dependent on smartphones, where analysts warn of slower growth even as Samsung sells one of every four handsets globally.

“We will expand our mergers-and-acquisitions strategy beyond a few target areas to pursue opportunities across a wide range of fields,” Lee said. The company wants to “enhance the competitive edge of our current businesses and capture new chances for future growth,” he said.

Prior investments include Sharp Corp., Novaled AG and Medison Co. as the Suwon, South Korea-based company tries to better integrate its hardware and software offerings.

Shares Slide

Samsung had 52.68 trillion won ($50 billion) of cash as of Sept. 30, the company said last month. After including debt, its net cash was 40.93 trillion won, compared with 33.16 trillion won at the end of June, it said.

Shares of Samsung fell 2.3 percent to 1,451,000 won in Seoul. The stock has dropped 4.7 percent this year, and the company lost $26 billion of market value in June after analysts at JPMorgan Chase & Co. and Morgan Stanley lowered sales and profit estimates, citing slower shipments of its flagship Galaxy S4 smartphone.

Samsung currently trades with a dividend yield of 0.55 percent, according to data compiled by Bloomberg.

The company will spend $14 billion on research and development by the end of this year, compared with $8 billion in 2010, Lee said today.

About 400 analysts and technology experts attended the briefing today, featuring presentations by the leaders of Samsung’s display, mobiles, chip and consumer-electronics units.

Capital Spending

“Samsung has grown into a global technology behemoth and needs to open itself up more to outsiders,” said Marcello Ahn, a Seoul-based analyst at Quad Investment Management. “At least it’s good to know that Samsung’s thinking about shareholder returns.”

The company has earmarked a record 24 trillion won in capital expenditure this year and had spent about 63 percent of the total as of Sept. 30. The spending this year is larger than the market value of Sony Corp.

The company is targeting annual sales of $400 billion in 2020, co-Chief Executive Officer Kwon Oh Hyun said.

Samsung last month posted record third-quarter earnings after extending its lead in the smartphone market and benefiting from a rally in chip prices.

Full-year net income is expected to rise to 31.4 trillion won, according to the average of 29 analyst estimates compiled by Bloomberg. Sales may rise to 232.1 trillion won, according to 41 analyst estimates.

The mobile unit, responsible for about two-thirds of earnings, posted record operating profit of 6.7 trillion won in the third quarter as the company tapped demand in China and India for mid-priced handsets.

Samsung this year added the S4, released the Galaxy Gear smartwatch, introduced the first phone with a curved screen and registered designs for spectacles to challenge Google Inc.’s Glass in the wearable devices market. It sold about 120 million handsets in the third quarter for a 28.7 percent market share, researcher Strategy Analytics said Oct. 29.

The company will sell more than 100 million units of its Galaxy S and Note series handsets combined this year, Shin Jong Kyun, head of Samsung’s mobile business, said today.

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