Samsung Electronics of South Korea posted a record $5.15 billion quarterly profit and predicted that its Galaxy smartphones, which outsell Apple’s iPhone and will be upgraded in the coming week, would bulk up earnings in the current quarter.
Samsung and Apple have carved out a near duopoly in the high-end smartphone market, as rivals have struggled to introduce compelling models that can really compete. The two controlled 90 percent of the market last year and that is not expected to change much this year or next, according to analysts at Bernstein.
The third generation of the flagship Galaxy S is to be unveiled in London in the coming week. The new Galaxy will be powered by Samsung’s quad-core microprocessor, which the company hopes to see used in handsets sold by Nokia, HTC and Motorola, as well as Apple, its biggest customer for components.
“We anticipate very strong demand for Galaxy S III,” Robert Yi, Samsung’s senior vice president and head of investor relations, told analysts. “When there’s strong demand in the market, we don’t necessarily need to spend a lot of marketing dollars to promote sales.”
Samsung’s quarterly handset division profits nearly tripled to 4.27 trillion won, or $3.8 billion, accounting for 73 percent of total profit. Operating margins jumped to 18.4 percent, from 12 percent in the preceding quarter, on strong sales of the Galaxy S and the Note phone/tablet, the surprise consumer hit of recent months.
Brian Park, an analyst at Tong Yang Securities, said Samsung’s handset momentum would continue this quarter with the new Galaxy S coming to market before the next iPhone. “The Galaxy S III’s specifications are expected to be sensational, and it’s already drawing strong interest from the market and consumers.”
In a sign that smartphones are where the mobile action is, Foxconn International Holdings, which assembles basic handsets for Motorola, Sony and others, warned of a deepening first-half loss on weak orders. Its Taiwanese parent, Foxconn Technology Group, assembles iPads and iPhones, and Foxconn itself swung to a profit last year as other clients like Nokia and Huawei Technologies shifted to higher-end smartphones.
Samsung, the world’s top technology firm by revenue, has overtaken Nokia, the longtime global cellphone leader, and is outmuscling Japanese rivals in televisions and memory chips. Its January-March operating profit nearly doubled, to 5.85 trillion won, in line with the company’s guidance, and was up from 5.3 trillion won in the previous quarter.
Samsung sold 93.5 million handsets from January to March — more than one in every four sold around the world, according to Strategy Analytics. That helped the Korean company overtake Nokia, which sold 82.7 million phones and had a 22.5 percent market share. Apple had a market share of 9.5 percent.
“Samsung’s smartphone success in the first quarter was the flip side of Nokia’s disappointment,” Matt Evans, an analyst at CLSA, said in a recent report.
Mr. Park of Tong Yang said Samsung’s handset earnings growth might slow this year, with the likely introduction of the iPhone 5 by Apple, “but the recovery of chips and displays will more than offset potential drops, sustaining earnings momentum.”
Samsung competes with Sony and LG Electronics in televisions, with Toshiba and SK Hynix in chips and with LG Display in flat-screens.
Profits from semiconductor sales more than halved to 760 billion won, hit by tumbling computer memory chip prices, while the television and home appliance business increased profits sharply to 530 billion won from a razor-thin 80 billion won a year ago.
Samsung and its homegrown rival, LG Electronics, are among the few global television manufacturers making money and winning market share, helped by sleek designs, crisp displays and new technologies, like 3-D and organic LED sets. Its Japanese competitors, Sony, Panasonic and Sharp, expect to have lost a combined $21 billion in the business year that just ended.
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