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Sat, Apr 14, 2007 - Page 10 News List

Samsung quarter profit falls again


Samsung Electronics Co said net profit fell for a second straight quarter amid declining prices for its mainstay computer chips, but expressed confidence yesterday that market conditions will recover later this year.

Samsung, the world's largest memory chip maker, said it earned 1.60 trillion won (US$1.72 billion) in the first quarter, down 15 percent from the same period last year as prices fell for chips as well as flat panel displays.

Sales for the Suwon, South Korea-based company during the three months ended March 31 rose 3.1 percent to 14.39 trillion won.

Samsung is also the world's top producer of flat-screen televisions using both liquid crystal and plasma displays. It ranks third globally in mobile phone handsets, and also produces other consumer electronics such as MP3 players and laptop computers.

In memory chips, Samsung manufactures both DRAM, or dynamic random access memory, chips used in personal computers, as well as NAND chips used in digital cameras and music players.

"DRAM and NAND prices fell too sharply over the first quarter to be offset by our cost reduction efforts," Robert Yi, Samsung vice president for investor relations, told analysts on a conference call.

"Of course this is a problem faced by all DRAM and NAND producers, not just Samsung Electronics," he said.

The result, the second straight quarterly profit decline, was worse than expected.

The average estimate of 11 analysts surveyed by Dow Jones Newswires forecast that the company would post a net profit of 1.69 trillion won on sales of 14.57 trillion won.

Samsung said its liquid-crystal-display business was slowed by what it described as "sluggish demand for large panels and a continued drop in panel prices."

Yi said that the bright spot was the company's telecommunications business.

Samsung sold 34.8 million mobile phone handsets, a quarterly record for the company "despite the overall market shrinking more than a little on seasonality," Yi said.

He attributed the increase to strong sales of the company's high-end Ultra edition phones as well as its lower-end mass market models.

Yi said prices for NAND chips were already improving and predicted there would be a supply shortage in the second half of the year. DRAM prices will likely stabilize by the end of the current quarter, he said.

Memory chip prices fell sharply from the same period last year, with DRAM chips sliding 26 percent and NAND plummeting 73 percent, according to Dongbu Securities' semiconductor industry analyst Lee Min-hee.

Lee agreed with Samsung's market outlook, saying demand for chips will rebound as computer makers take advantage of current low prices to upgrade memory capacity. An expected pickup in demand for Microsoft's latest operating system, Windows Vista, once security problems are fixed, will also contribute, he said.

"The memory business will recover in the second half," Lee said.

Shares in Samsung, which released earnings after the stock market opened, fell 0.5 percent to close at 601,000 won. The shares fell as much as 1.5 percent and rose as high as 1 percent during the day.

Samsung's Yi warned that those who ignored the prospects for a rebound stand to lose.

"I believe that investor myopia will not be rewarded," he said.

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