Smartphones powered Samsung Electronics Co to record quarterly earnings, but its shares fell yesterday as lower-than-expected overall sales underlined the threat from Europe’s economic malaise.
The world’s largest maker of memory chips, mobile phones and flat-screen panels estimated its second-quarter operating profit at between 6.5 trillion won and 6.9 trillion won (US$5.7 billion and US$6.1 billion), a 79 percent jump from a year earlier based on the midpoint of that range.
Analysts said the sharp rise in operating profit was driven by Galaxy smartphone sales. Analysts believe about 4.4 trillion won of its second-quarter profit is from its mobile communications division, accounting for about 65 percent of its operating earnings. The preliminary profit met expectations and beat Samsung’s previous record of 5.85 trillion won profit in the first quarter of this year.
However, the South Korean company’s guidance for second-quarter revenue of between 46 trillion won and 48 trillion won was below the average market forecast of around 50 trillion won. Samsung shares closed 2 percent lower in Seoul. The broader KOSPI benchmark fell 0.9 percent.
The revenue figure “means that global demand for information and technology products during the second quarter was weaker than expected,” Hi Investment and Securities analyst Song Myung-sub said.
The chronic European debt crisis is taking a toll on demand in Europe, North America and China, which are key markets for manufacturers of PCs, televisions, mobile phones and home appliances. Consumers and PC and TV makers are primary revenue sources for Samsung, which supplies chips and flat-screen panels for global PC and TV makers, in addition to selling its own finished products.
The global television market shrank from a year earlier during the first half of this year, Yoon Boo-keun, president of Samsung’s television and home appliance division, said at a media event on Wednesday. The company is preparing for a possible crisis with a contingency scenario for each region, Yoon said.
Growth in the mobile phone industry’s handset shipments this year will be the slowest in three years at just 4 percent, market researcher International Data Corp said last month.
Analysts including Lee Sun-tae at NH Securities and Investment said Samsung’s low-end smartphone sales in China were less than expected in the second quarter due to competition from Chinese handset makers and slowing demand.
While brisk demand for high-end mobile phones is helping Samsung offset weaker profit growth in its other businesses, its heavy reliance on smartphones is a source of concern, some say.
“There are concerns about the economic situation for the rest of the year as well as views looking at Samsung’s lawsuits with Apple Inc as a risk,” IBK Securities analyst Lee Seung-woo said.
Samsung lost two legal bids to lift preliminary US sales bans imposed on one of its Galaxy Tab tablet computers and the Galaxy Nexus smartphone. A California court last month accepted Apple’s requests to block sales of Samsung’s mobile devices that are allegedly infringing the company’s intellectual property.
Although the sales ban will be limited because the products are not a big part of Samsung’s US mobile sales, the court decision stoked concerns about Galaxy S III sales in North America, experts said.