Samsung
The global economy remains weak and increased competition will “pressure” Samsungs profitability this year, Vice President Robert Yi said in a conference call. The Suwon, South Korea-based company reported today first-quarter net income fell to 619.2 billion won ($461 million) from 2.19 trillion won a year earlier because of losses from chips and LCDs.
Samsung fell the most in three months in Seoul trading, snapping a two-day rally, as concerns over the profit outlook overshadowed earnings that beat estimates. Credit Suisse Group AG said the South Korean chipmakers comments were more cautious than those of other major technology companies.
“The companys tone was conservative and there seems to be some profit taking as the recent share gains have already reflected better-than-expected earnings,” Song Myung Sup, an analyst at HI Investment & Securities Co., said by telephone from Seoul today. “But there is no doubt in the belief that earnings will continue to recover.”
Samsung fell 5.6 percent to close at 592,000 won on the Korea Exchange, dragging down the MSCI Asia Pacific Index 0.3 percent. The stock has gained 31 percent this year on speculation that production cuts will help ease oversupply of chips and LCDs.
Premature Recovery
“It is still premature to expect the global economy as well as the consumer demand recovery in the near term,” Yi said. He cited rising factory usage by memory and display makers and prices among “risk factors” for the company throughout the year.
Net income was more than 11 times higher than the median estimate in a Bloomberg survey of 20 analysts. Samsung posted an operating profit of 147.6 billion won, compared with the 242 billion won loss projected by the survey, as earnings at the handset division unexpectedly rose.
The semiconductor division at Samsung, the worlds largest maker of memory chips., posted a second-straight quarterly deficit because of a glut of memory. The 650 billion-won loss was wider than the 435 billion won projected by the survey. Hynix Semiconductor Inc., the second-largest computer-memory chipmaker, today reported a sixth consecutive quarterly loss.
Chip Prices
Prices of the benchmark computer-memory chip declined 48 percent at the end of March compared with a year earlier, according to Dramexchange Technology Inc., operator of Asias biggest spot market for semiconductors. Prices of flash memory chips, which store songs and data in portable musical players and digital cameras, fell 20 percent in the period.
Still, industrywide output cuts have helped drive up prices of dynamic random access memory, or DRAM, by 64 percent from the end of last year, while those of flash memory have more than doubled. DRAM chips temporarily store data to allow computers to process multiple programs simultaneously.
LCD Losses
The loss at Samsungs LCD division was about 310 billion won, compared with a profit of 1 trillion won a year ago. The worlds largest LCD maker was projected to post a shortfall of 341 billion won from the business, according to the survey.
Still, LG Display Co. said last week demand is stronger than expected and prices are showing signs of a recovery. The Seoul-based company said it expects losses to end before the end of June because of rising panel prices.
Earnings at Samsungs mobile-phone division rose 2 percent to about 940 billion won, beating the median estimate in the Bloomberg survey by more than 80 percent. The 12 percent operating margin exceeded the 10.4 percent generated by Nokia Oyjs handset unit and 6 percent at LG Electronics Inc.s telecommunications division. Sony Ericsson Mobile Communications Ltd., the fourth-largest producer, last week posted a loss.
Mobile Phones
Nokia, based in Espoo, Finland, last week reiterated its forecast for a 10 percent decline in industry unit sales this year. Sony Ericsson, the mobile-phone venture between Sony Corp. and Ericsson AB, also said global handset shipments will shrink at least 10 percent in 2009.
“The mobile-phone performance was awesome, showing the companys benefiting from the demise of its rivals,” said Lee Jin Woo, a fund manager at Seoul-based KTB Asset Management Co., which manages $9 billion in assets. “All the key divisions are pointing toward a better picture as the economy turns around.”