Samsung Electronics Co posted a better-than-expected first-quarter profit after the early release of Galaxy S7 smartphones gave it a head-start on Apple Inc and Chinese rivals, helping to counter an industry downturn.
Operating income rose to 6.6 trillion won (US$5.7 billion) in the three months ended last month, the world’s largest maker of telephones and memory chips said in preliminary results released yesterday.
That compares with the 5.53 trillion won average of analysts’ estimates compiled by Bloomberg.
Photo: AFP
Samsung debuted its high-end smartphones last month, about a month earlier than last year, with sales of the S7 lineup estimated to have hit 9 million units during their first month — triple those of the S6 in the same time frame. Production of curved displays for its Edge version also went more smoothly this time, avoiding the hiccups that plagued last year’s wraparound-screen line while holding down costs.
“The biggest reason for the sharply improved profitability is largely due to much lower marketing spending for the mobile business,” said Yoo Eui-hyung, an analyst at Dongbu Securities Co in Seoul. “The big disparity between the earlier profit estimates and the latest revisions stems entirely from the mobile business. The faster release surely helped, but it’s dubious whether the S7 can continue to surprise the market in the longer run.”
The shares finished 1.3 percent lower at 1,269,000 won in Seoul. The stock fell for a third straight year last year.
Sales were 49 trillion won in the quarter, Suwon-based Samsung said, compared with the 48.8 trillion won analysts expected.
The company will not provide net income or break out divisional performance until it releases audited results later this month.
Most of Samsung’s revenue is in telephones, a decelerating market in which it also competes with Huawei Technologies Co (華為) and Xiaomi Corp (小米). Smartphone sales this year are expected to rise by a single-digit percentage for the first time, Gartner Inc said.
“The first-quarter earnings have already reached its peak for this year and it will only go lower from here,” Greg Roh, an analyst at HMC Investment Securities in Seoul said, citing depressed industry demand.
Operating profit at the mobile unit probably rose 19 percent to 3.25 trillion won in the first quarter, the median estimate of six analysts surveyed by Bloomberg News said.
The popularity of the S7, as well as a refreshed portfolio of cheaper Galaxy models, such as the A and J series, have given the division’s earnings a shot in the arm.
Samsung is continuing to reduce the number of telephones in its lineup as it tries to cut spending and focus on competitive devices.
Total smartphone shipments for the first three months were estimated at 78 million, compared with 82 million units during the peak holiday quarter, four analysts surveyed by Bloomberg said.
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