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Samsung's fourth quarter net profit dipped 6.6 percent

Samsung Electronics Co said yesterday that net profit in the fourth quarter of last year fell 6.6 percent amid sharp declines in prices for computer memory chips, though sales of mobile phone handsets surged to a record.

As the results were being released, South Korean special prosecutors were raiding the Seoul headquarters of Samsung Group, the conglomerate that Samsung Electronics anchors.

Investigators are probing allegations by a former Samsung Group lawyer that the conglomerate set up a slush fund to bribe prosecutors, government officials and others. Samsung has denied the allegations.

Samsung Electronics, the world's largest manufacturer of memory chips, earned 2.212 trillion won (US$2.36 billion), in the three months through last month, the company said in a statement to South Korea's financial regulator. The company posted net profit of 2.368 trillion won a year earlier.

Samsung's earnings result, though its fourth net profit decline in the past five quarters, was better than expected. The average estimate of nine analysts surveyed by Dow Jones Newswires forecast that Samsung would post a net profit of 1.97 trillion won.

Investors -- apparently happy with the earnings results and unflustered by the raid on Samsung Group headquarters -- lifted Samsung's share price as much as 3 percent during trading yesterday. The shares later pared gains as the broader stock market turned south and finished 1.3 percent higher at 532,000 won.

Quarterly sales rose 11 percent to a record 17.48 trillion won from 15.68 trillion won a year earlier. The result was better than the 17.09 trillion won forecast by the analysts.

Samsung also is the world's top producer of liquid crystal displays and flat-screen televisions and ranks No. 2 in mobile phones behind Finland's Nokia Corp.

The Suwon, South Korea-based company manufactures both DRAM, or dynamic random access memory, chips used in personal computers, as well as NAND chips used in digital cameras, music players and mobile phones.

Prices for both products have fallen sharply over the past year.

"For DRAM, demand was strong but pricing was weak because of oversupply, essentially," Chu Woo-sik, executive vice president for investor relations, told analysts on a conference call after the earnings were released.

Lee Min-hee, an analyst at Dongbu Securities Co in Seoul, said industrywide average selling prices for DRAM chips have skidded about 85 percent over the past year amid a supply glut after manufacturers were too optimistic about personal computer demand last year.

He added, however, that Samsung escaped the worst of that because it has diversified into specialty DRAM chips such as mobile DRAM and graphic DRAM.

"The oversupply of chips is still in the distribution channel," he said.
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