Smartphones power Samsung to record quarterly profit

AppleScruff1

macrumors G4
Original poster
Feb 10, 2011
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By Miyoung Kim
SEOUL | Fri Jan 6, 2012 9:47am EST
(Reuters) - Samsung Electronics, the world's top maker of memory chips and smartphones, reported a record quarterly profit on Friday, aided by one-off gains and best-ever sales of high-end phones.

The South Korean firm, which surged past Apple as the world's top smartphone maker in the third quarter, is quickly building on its supremacy with sleek designs and a rich product line-up, while the latest models from the likes of HTC, Nokia and BlackBerry maker Research in Motion struggle to interest consumers.

Samsung is also weathering a squeeze on its bread-and-butter memory chip business with new revenue sources such as mobile processing chips and high-end OLED displays. Key rivals are increasingly turning to Samsung for components to power their tablets and smartphones.

The South Korean firm posted 5.2 trillion won ($4.5 billion) in quarterly operating profit, beating a consensus forecast of 4.7 trillion won by analysts surveyed by Thomson Reuters I/B/E/S. It said actual profit may rise or fall by 200 billion won from the preliminary figure when the firm provides detailed earnings later this month.

The result would top Samsung's previous record profit of 5.0 trillion won earned in the second quarter of 2010 and is up 22 percent from the preceding quarter.

One-off gains expected in the fourth quarter include around 500 billion won from the sale of its hard disk drive business to Seagate Technology, and reduced mobile provisions involving royalty payments, according to analysts.

"Samsung has traditionally seen its first-quarter profit drop from the fourth quarter, but profit will hold up well, reaching between 4.5 trillion won and 5.0 trillion won, with smartphone sales expected to rise further," said Song Jong-ho, an analyst at Daewoo Securities.

Samsung only entered the smartphone market in earnest in 2010, but its handset division is now its biggest earnings generator.

Sales have skyrocketed thanks to a slick production system that rapidly brings new products to market and has mitigated weakness in its component business of mainly memory chips and flat screens.

Taiwan's HTC, which shocked the market with revenue warnings in recent months, reported on Friday a worse-than-expected quarterly profit drop, its first retreat in two years, as models from the world's No.4 smartphone maker scrambled to compete with Apple's iPhone and Samsung's Galaxy range.

SMARTPHONE GAINS

Samsung shares closed down 1.4 percent, after charging to a record 1.11 million won earlier this week in anticipation of an upbeat forecast. The company is Asia's most valuable technology firm with a market value of around $150 billion.

Smartphone shipments are forecast at a record 35 million in the fourth quarter, up one quarter from the preceding three months, when it first surged past Apple as the world's top smartphone vendor.

In 2012 it is expected to sell as many as 170 million smartphones, according to BNP Paribas and Korea Investment & Securities, the most bullish street view, from an estimated 95 million last year, powered by a diverse product portfolio that spans high-end Galaxy models to cheap phones using Samsung's own "bada" software.

Its latest Galaxy Note model, which runs on fast fourth-generation (4G) networks, is touted by some followers as a "phablet" as its 5.3-inch display and powerful dual-core processor makes it work as both a tablet computer and smartphone. Its successful debut in some European and Asian markets during the year-end holiday season has raised hopes for a solid U.S. launch in coming months.

"As expectations for Apple to continue its innovation trail is receding a bit, this will be the year when Samsung solidifies its commanding lead in the smartphone market," said Kim Yun-sang, a fund manager at IBK Asset Management, which owns Samsung stock.

Samsung, the world's biggest technology firm by revenue, estimated fourth-quarter sales at 47 trillion won.

Major headwinds for Samsung in 2012 include slowing growth in global PC sales, which will dent sales of its core computer memory chips.

Weak computer memory chip prices will continue to squeeze earnings at least until the first half of this year. Prices of PC DRAM (dynamic random access memory) chips dropped about 30 percent in the fourth quarter alone, near to production costs.

Samsung remains the sole profitable DRAM chipmaker and is likely to fare better than rivals, helped by heavy investments to cut production costs with finer processing technology.

Its foray into the booming tablet market has been also hit by a global patent battle with Apple, which is seeking to ban sales of Samsung's tablets in major markets.

http://www.reuters.com/article/2012/01/06/us-samsung-idUSTRE80429020120106
 

ChazUK

macrumors 603
Feb 3, 2008
5,390
24
Essex (UK)
I've been surprised on how much Samsung mobile hardware we've had (as a family) over the past few years (Galaxy S i9000, Nexus S, Omnia 7, Galaxy S II i9100, Galaxy Nexus). It's very likely I'll be getting a Galaxy S III when it arrives if Samsung keeps things up.

Samsung are easily one of the better smartphone manufacturers from my experiences with them. Alongside Apple, I'd say they are the top two manufacturers of smartphones quality wise.

Hopefuly HTC's recent results wil give them the kick up the arse theyt need to get beck to producing better handsets too.

I hope to see a strong Samsung and Apple pushing things forward for now.
 

Yumunum

macrumors 65816
Apr 24, 2011
1,452
0
U.S.
The top dogs are Apple and Samsung. LG, HTC, Motorola... They're always pushed to the side in my mind.

GS3 will kill the 4S for many people (including me). Many would already choose the GS2 over the 4S.

Why can't MWC come sooner...
 

BreakGuy

macrumors 6502a
Nov 23, 2009
818
0
NZ, South Pacific
As previously mentioned, the two top players in the smartphone market are Samsung and Apple.

I won't buy an iPhone. For me, an iPhone is too overpriced for what it does - that's my opinion, so let's not turn it into a debate. I'll always check out Samsung first when I need a new phone. HTC are in there somewhere too.
 

maflynn

Moderator
Staff member
May 3, 2009
65,465
31,508
Boston
Its amazing how quickly Samsung sprang to the top of the list. HTC was the 800 lbs gorilla for android, and in a matter of a year (or 2?) Samsung is now that behemoth.
 

*LTD*

macrumors G4
Feb 5, 2009
10,703
1
Canada
This is interesting. Samsung *did* rise to the top of the Android heap rather quickly. Notwithstanding the conspicuous "inspiration" they've taken from Apple, which other vendors have avoided doing or couldn't do (Hi, HTC), Samsung have managed to out-volume all the other Android vendors, and have actually made an effort to churn out higher-end devices that are actually worthwhile.

Here's an interesting piece that provides some food for thought. What does Samsung's success mean for their relationship with Google? How might Samsung at some point exercise their power?

http://www.cbsnews.com/8301-505124_162-57353995/samsung-sells-enough-phones-to-twist-googles-android-arm/

Samsung sells enough phones to twist Google's Android arm

(MoneyWatch) (Credit: Samsung) COMMENTARY The smartphone wars have largely boiled down to Apple (AAPL) and Google (GOOG). Sure, Research in Motion (RIM) and Microsoft (MSFT) are still technically around, though hardly looking good. But smartphones have become a largely two horse race. And that's what makes Samsung's announcement of record profits so interesting when looking at the mobile industry.

With phone manufacturer HTC showing a financial decline and Samsung selling an estimated 35 million smartphones in the past quarter, the South Korean company takes on new significance. If you're responsible for nearly half the Android registrations that Google gets, suddenly what you want out of the operating system becomes pretty darn important.

A lot of phones

At last count, Google has been seeing a flood of new Android device activations. The current run rate is about 255.5 million a year -- that's nearly 64 million a quarter.

Even if Apple sees as many as 35 million iPhones sold for the last quarter, the additional iPads and iPhone touches still don't get it close to 64 million. The question is, who are the big movers for Google? The one name that stands out is Samsung.

Even though the company doesn't report smartphone unit sales as Apple does, analysts estimate that Samsung may have sold 35 million smartphones last quarter alone.

Roll out the red carpet

At current rates, and assuming that virtually all of the sales were of Android models, Samsung would be responsible for close to 55 percent of Android smartphone movement. That puts Google into an interesting situation.

Even though Google is using a PC-like business model, it isn't achieving the degree of independence from hardware vendors that Microsoft once enjoyed. What would management do if Samsung decided it could get along fine with some other option for running its phones? Not even Motorola (MMI), which Google is buying, could come close to making up that type of volume.

Unlike virtually any other Android hardware vendor, Samsung has Google over a barrel. It could push for changes, new technical directions, and features that it thought would be good for its strategic plans. What could Google say? Go use Windows Phone? Google can't afford for Samsung to even consider the possibility.
 
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ChazUK

macrumors 603
Feb 3, 2008
5,390
24
Essex (UK)
The appaling sales of Samsung's Windows Phone 7 powered hardware (outsold by their own in-house Bada OS) compared to their Android handsets suggests that Sasmung needs Google as much a Google would need Samsung.

Why Samsung would push for changes within Android when they're quite capable of adding what they want themselves to their own builds is questionable.

Would Samsung really want some super duper functionality to be added to the AOSP tree for its competitors to take advantage of when the source is release or are they more likely to keep their own stuff to themselves? (I'd expect the latter)

Still, it's nice to see some negative spin to Samsung's recent success.
 

kdarling

macrumors P6
Here's an interesting piece that provides some food for thought. What does Samsung's success mean for their relationship with Google? How might Samsung at some point exercise their power?
This article would've been far more meaningful if it had first detailed what influence HTC, the major Android maker for years, had. In other words, what historical manufacturer influences on Android have been seen?

*crickets*

Apparently not much. Perhaps the original target screen resolutions, and that would mostly be because of supply.

--

How about a different article? One on how Apple also sold lots of smartphones, but still bent over for years to AT&T's desire to keep bandwidth intensive apps usable on Wi-Fi only.
 

roadbloc

macrumors G3
Aug 24, 2009
8,785
211
UK
Even though Google is using a PC-like business model, it isn't achieving the degree of independence from hardware vendors that Microsoft once enjoyed. What would management do if Samsung decided it could get along fine with some other option for running its phones? Not even Motorola (MMI), which Google is buying, could come close to making up that type of volume.

Unlike virtually any other Android hardware vendor, Samsung has Google over a barrel. It could push for changes, new technical directions, and features that it thought would be good for its strategic plans. What could Google say? Go use Windows Phone? Google can't afford for Samsung to even consider the possibility.
Okay. Um... so what? Who actually cares? You blabber on about this vertical integration all the time and yet when it comes to hardware and software manufacturers working closely together and setting standards, you no longer approve.

It is interesting how many double standards you have.