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Samsung upbeat despite Q2 profit drop

Samsung Electronics Co said yesterday that second-quarter net profit fell 5 percent from a year ago on price declines for its mainstay computer memory chips, but expressed confidence of a rebound in the market.

Samsung shares surged 6.4 percent to finish at 687,000 won (US$749) amid investor expectations for stronger business performance later in the year as well as on a news report that US investor Carl Icahn may be considering a bid for the company.

Samsung, the world's largest computer memory chip manufacturer, earned 1.42 trillion won in the three months ended June 30, the company said in a statement.

Sales rose 3.6 percent during the quarter from the same period last year.

"During the second quarter, most business divisions of the company performed well," Chu Woo-sik, executive vice president and head of Samsung Electronics investor relations, said in a statement.

"The major exception was [the] semiconductor" sector, though he added that the company expects the business will recover in the second half of the year.

The company doesn't release quarterly earnings forecasts, but investors were betting on stronger earnings for the rest of the year.

The profit result, the third straight quarterly decline, was better than expected. The average estimate of nine analysts surveyed by Dow Jones Newswires forecast that Samsung would post a net profit of 1.33 trillion won.

Computer memory chip prices fell sharply in the second quarter amid oversupply. Prices and supply conditions are highly seasonal, with demand usually strongest in the final two quarters of the year when demand for personal computers traditionally picks up.

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 chip prices slid 52 percent from the same period the year before and 36 percent from the previous quarter, Dongbu Securities' semiconductor industry analyst Lee Min-hee said.

While NAND prices fell 57 percent year on year, they rose 17 percent from the first quarter, Lee calculated.

Besides memory chips, Samsung is also the world's top producer by market share of flat-screen televisions in both liquid crystal and plasma display versions. It ranks third globally in mobile phone handsets, and also produces other consumer electronics such as MP3 players and laptop computers.

Samsung recorded sales of 16.63 trillion won compared with 14.1 trillion won a year earlier. Analysts had expected revenue of 15 trillion won

Samsung released earnings on the heels of a report that Icahn may be planning a hostile takeover bid. Yesterday's report in the Chosun Ilbo, South Korea's largest newspaper, cited an unnamed high-ranking official at Samsung.

Samsung is mapping out defensive measures against potential hostile takeover bids by the US billionaire investor, and possibly other foreign buyout funds, the report also said.

In response to the report, a company executive said that Samsung has strategies to combat hostile takeover bids, although it's not aware of the existence of any such activity.

"This company is not aware of such an attempt," Chu told a conference call with analysts in response to a question about the report.

"Should someone try to do something like that we have appropriate sets of strategy in place that we will implement that would be effective against those attempts," Chu said, without elaborating.

Hostile takeover attempts by foreign investors in South Korea are rare. Icahn and other US investors were involved last year in an unsuccessful takeover bid for South Korean tobacco company KT&G Corp.

Any attempt to take control of Samsung, the country's most prized corporate icon and a symbol of the country's emergence as an industrial economy, would likely be met with fierce resistance.

Samsung Electronics is South Korea's most valuable company with a market capitalization of 101 trillion won as of the close of trading yesterday.

Foreign investors owned 49.25 percent of its shares at the end of the session.

Samsung shares have risen 12 percent this year.
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