Sat, Jan 08, 2011 - Page 10 News List

Samsung forecasts 12.8% fall in Q4 operating profit

AFP, SEOUL

South Korean giant Samsung Electronics Co yesterday guided that fourth-quarter operating profit could fall 12.8 percent from a year earlier to 3 million won (US$2.67 billion) amid a slowdown in European consumer demand, while analysts forecast earnings had bottomed out.

The guidance from the world’s top manufacturer of memory chips and LCD panels was lower than the 3.28 trillion won average forecast of seven analysts in a Dow Jones poll. The earnings also represented a 38.3 percent drop from the previous quarter.

The weaker-than-expected income corroborated the view that the economic slowdown in Europe was taking its toll on demand for consumer electronics, mainly PCs and flat-screen TVs. This has led to price erosion in its mainstay memory chip and flat-panel divisions, hurting profitability.

“The number slightly misses the consensus forecast, but the company has more upside momentum in the longer-term, such as growing smartphone sales,” Shinyoung Securities analyst Lee Seung-woo told Dow Jones Newswires.

Sales were estimated at 41 trillion won, up 4.5 percent from a year earlier.

Analysts said they expected Samsung’s IC business to continue to suffer from falling chip prices amid an industry slowdown, with its chip division accounting for more than half of its total profit.

However, they expressed optimism, citing easing marketing costs and brighter prospects for its mobile business. Samsung is the world’s second-largest maker of cellphones, behind Nokia Corp of Finland.

They said earnings were likely to start improving from the beginning of this year as brisk sales of smartphones, tablet devices and Web-connected TVs are likely to drive sales.

“Samsung’s quarterly operating profit is expected to have hit bottom in the fourth quarter of last year and will continue to rise this year,” Meritz Securities analyst Lee Sun-tae said.

He said first-quarter operating profit would reach 4 trillion won.

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