Samsung Electronics, the world's largest memory-chip maker, announced yesterday weaker-than-expected results for the first quarter, sending chills throughout the stock and foreign-exchange markets.
In the first quarter, the firm which is also the world's largest maker of liquid-crystal displays (LCDs), reported a 1.5 trillion won (US$1.46 billion) net profit, down 52 percent from 3.1 trillion won a year ago.
First-quarter operating profit plunged 46.4 percent to 2.1 trillion won, falling well short of market forecast for some 2.4 trillion to 2.5 trillion won. Sales in the first quarter slid 4.2 percent year-on-year to 13.8 trillion won.
Compared with the previous quarter, net profit fell 17.9 percent, sales were down 0.6 percent but operating profit was up 40.3 percent.
The mediocre results were mainly due to the appreciation of the won against the US dollar and weak prices for memory chips, which fell 20 percent during the first quarter, as well as a glut in the global LCD market.
Chu Woo-Sik, the head of Samsung's investor relations team, said the won's sharp appreciation against the US dollar reduced export earnings by 900 billion won in the first quarter.
The won appreciated some 15 percent last year alone.
Chu noted that the company will start churning out LCDs en masse from its seventh-generation lines at the end of this month and will benefit too from South Korea's emerging digital multimedia broadcasting market.
"The global DRAM (dynamic random access memory chip) market is expected to start turning around in the second half this year as well," Chu said.
Dongwon Securities analyst Michael Min said the first-quarter results missed market expectations by a wide margin, dashing hopes for an upside surprise.
He said, however, that the market was overreacting as Samsung's performance is expected to improve in the second quarter.
Jay Kim of Hyundai Securities said now was a good time to buy Samsung.
"The numbers were lower but now is a good chance to buy on weakness," he said. "Flash memory chips performed great. Handsets returned to being a key cash cow and LCD operations were better than expected," he added.
Asian tech shares sank 2 percent yesterday, leading most Asian share markets sharply lower, after Wall Street shares skidded to 5-month lows and top techs IBM and Samsung Electronics unveiled grim earnings.
Japan's NIKKEI index sank 1.66 percent to its lowest close in 10 weeks after Samsung released its first-quarter figures, fanning fears on the sector's outlook and knocking Japanese tech firms such as Kyocera Corp.
The earnings from Samsung, the world's biggest memory chip maker, came shortly after the IBM posted results that fell short of low expectations.
"Samsung's results were surprisingly weak and that joined with the IBM news became a big blow to Tokyo," said Yoshihiko Kosuga, equities deputy general manager at Mizuho Investors Securities.
Samsung closed 2.1 percent lower, leading South Korean stocks down 0.7 percent.
The Dow Jones industrial average fell 125.18 points or 1.2 percent to finish at 10,278.75. The NASDAQ Composite Index fell 1.4 percent to 1,946.71. IBM, the world's largest computer company, fell more than 5 percent in after-hours trade.
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