Samsung Sees Third-Quarter Profit Rebounding
October 06 2015 - 9:20PM
Dow Jones News
SEOUL—Samsung Electronics Co. estimated its third-quarter
operating profit rebounded sharply from a year earlier on robust
sales of chips and displays used in mobile phones and other
gadgets.
The positive guidance from the world's biggest smartphone maker
suggests that Samsung's earnings may have bottomed out, ending a
nearly two-year decline from tepid sales and deteriorating profit
from mobile phones.
Following years of exuberant growth, profits at Samsung, the
world's largest smartphone maker by shipments, began to dive last
year as the company's profits were squeezed by stiff competition
from Chinese handset makers that launched high-quality phones at
much cheaper prices while consumers flocked to high-end smartphones
from Apple Inc. rather than Samsung's Galaxy phones.
While the mobile phone business isn't likely to see a
significant rebound as growth in global demand for smartphones cool
amid saturated markets, Samsung's earnings are being powered by
strong growth in its chip business due to tight supply and firm
pricing, analysts say. Samsung's chip unit likely accounted for
about half of the company's profit in the third quarter, analysts
said, while strong sales of displays to Chinese smartphone makers
also contributed to its bottom line.
The South Korean technology company said Wednesday its operating
profit for the three months ended Sept. 30 likely rose 79.8% to
about 7.3 trillion Korean won (US$6.3 billion), its first
year-over-year growth since the third quarter of 2013 when the
company posted a 26% increase. Revenue likely rose about 7.5% to 51
trillion won.
Analysts were expecting Samsung to post an operating profit of
6.5 trillion won on revenue of 50.5 trillion won, based on a poll
of nine analysts.
Samsung's mobile division likely performed better in the third
quarter than a year earlier as it has been streamlining its
smartphone lineup to cut costs, while introducing its flagship
models faster to combat stiff competition. Samsung launched a pair
of new smartphone models—the Galaxy Note 5 and the Galaxy S6 Edge
+—in August, advancing the timing of its launch by several weeks to
beat Apple Inc. in the market.
The new Samsung phones are sold with a rebate of up to $120
through select carriers in the U.S., with an extra benefit for
customers switching from iPhones—an aggressive attempt at
maintaining its share in the U.S. market while seeking to expand
the adoption of its recently launched mobile payment service,
Samsung Pay. But the heavy promotion is likely to come at the
expense of the company's mobile profit margins, analysts say, which
likely fell to 8% to 9% from 11% in the second quarter.
Samsung's mobile unit likely posted an operating profit of about
2 trillion won, analysts estimate, up from 1.75 trillion won a year
earlier. This compares with an estimated operating profit of about
3.5 trillion won expected from the company's chip unit.
The company doesn't disclose divisional figures and final
results are due later this month.
"The mobile unit isn't out of the woods yet," said C.W. Chung,
an analyst with Nomura Securities in Seoul. "Unless that changes,
it won't be easy for Samsung to get back on an overall growth
track."
Write to Min-Jeong Lee at min-jeong.lee@wsj.com
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(END) Dow Jones Newswires
October 06, 2015 21:05 ET (01:05 GMT)
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