Samsung says profit up 26%, but warns of slower smartphone growth

 

Seoul: Samsung Electronics ltd quarterly operating profit surged 26% to a new record, matching estimates and powered by a strong recovery in its memory chip business as smartphone sales growth eases sharply.

 

The smartphone leader has posted a record profit in six of the past seven quarters but may find it hard to extend its winning streak without a new hit gadget, after less-than-spectacular launches of its Galaxy Gear smartwatch and Galaxy Round curved phone in recent months.

 

Samsung forecast on Friday that strength in its bread-and-butter chip business would continue in the current quarter, while growth in smartphones would slow due to intensifying competition during the year-end holiday season.

 

“Samsung has done well, having rapidly caught up with Apple in the smartphone market. But I’m concerned whether Samsung would be able to do better,” said Kim Sung-soo, a fund manager at LS Asset Management.

 

 

“Like Nokia, Samsung may hit a limit in increasing market share. Apple is also fighting back, signaling an uphill battle for Samsung. Samsung needs to show its new growth engines to revive momentum in its stock price.”

 

Shares in Samsung traded unchanged after the earnings announcement versus a 0.3% decline in the wider market.

 

The South Korean firm expected smartphone shipments would grow at around 1-5% in the current quarter from the previous quarter, while selling prices would remain unchanged or increase slightly.

Samsung on Friday said July-September operating profit rose to 10.2 trillion won, in line with its estimate.

 

Profits at its chip business doubled to 2.06 trillion won, the highest in three years, reflecting stronger chip prices this year and tighter supply since a fire last month at a Chinese plant owned by SK Hynix.

“Mobile DRAM shipments will stay strong with the release of various low- to high-end smartphones as the holiday season nears. With the rise in demand for specialty DRAM and NAND, the market will experience tighter supply,” Samsung said in a statement.

 

The mobile division, Samsung’s biggest earnings generator, reported a record 6.7 trillion won profit as a greater variety of cheaper Galaxy smartphones boosted shipment

 

 volumes and helped counter weakening growth in the lucrative high-end segment.

 

Samsung, which competes with Apple.in in the mobile market, faces margin pressure in the current quarter as it splashes out on marketing its high-end Galaxy S4 and Note 3 smartphones during the year-end holiday season.

 

Shares in Samsung, worth $222 billion, rose 10% over the past three months, outperforming a 7% gain in the wider market.
RAHUL KUMAR GUPTA,
PGDM 1st YEAR