Samsung Electronics Co's first-quarter profit fell a bigger-than-expected 41 percent as prices slid. Shares of the world's biggest memory-chip maker rose 4.3 percent after Samsung said it expected to sell more computer chips and flat-panel displays this quarter.
Net income at Samsung, second only to Intel Corp in overall semiconductor sales, fell to 1.13 trillion won (US$936 million) from a record 1.9 trillion won a year ago after the price of computer-memory chips fell by almost half. A Bloomberg News survey of nine analysts had a median forecast of 1.48 trillion won.
Samsung has a "positive picture" for the current quarter, Chu Woo-sik, vice president of investor relations, said on a conference call. In a bid to edge out competitors, the company will increase its production of memory chips and flat screens this quarter at plants outfitted with the latest equipment.
"Investors are looking at what will happen to the company and the industry rather than what has already happened," said Oh Jong-moon, chief investment officer at Midas Asset Management Ltd, who oversees 1.7 trillion won (US$1.41 billion) in Korean assets.
Oh's stake in Samsung Electronics, whose shares have fallen 22 percent the past year, accounts for about a fifth of his holdings. "The stock had already reflected concern about first-quarter earnings," he said.
Samsung, which claimed the No. 2 spot in chip sales behind Intel last year, expects its policy of outspending rivals to pay off this quarter when its more efficient chip and liquid-crystal display plants boost production.
The company raised its forecast for capital spending this year to 6.78 trillion won from 6 trillion won, putting it as much as 44 percent ahead of Intel and extending its lead as the largest spender on equipment and new plants in the industry.
Samsung's shares were up 3.6 percent at 313,000 won early yesterday afternoon in Seoul. They rose as much as 4.3 percent earlier in the day following the earnings announcement.
Representatives from Samsung's liquid-crystal display, memory-chip and cell-phone divisions said they expect prices to stabilize or increase in the current period.
"As long as selling prices don't fall too much, we can expect a reasonably bright prospect for the second quarter," Chu said on the conference call.
An oversupply in the memory-chip industry will shrink to 1.1 percent in the second quarter from 2.3 percent in the first, said Kim Il-ung, head of Samsung's semiconductor marketing. Dynamic random-access memory chips, the main memory in PCs, may be in short supply this quarter and again in the second half, he added.
Operating income, or sales minus the cost of goods sold, tumbled to 1.35 trillion won from 2.41 trillion won, the company said. Sales of cell phones totaled 13.2 million in the quarter.
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