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Samsung profits top forecast as mobile biz doubles
Question of the Day
SEOUL, SOUTH KOREA (AP) - Samsung Electronics Co. reported Friday forecast-beating results for the fourth quarter of 2012 as profit from its mobile business more than doubled from a year earlier.
Samsung’s October-December net income reached 7.04 trillion won ($6.58 billion), a 76 percent surge of 4.01 trillion won a year earlier. Analysts expected 6.95 trillion won in income according to FactSet.
Sales and operating income were slightly higher than its earlier preview. Sales rose 19 percent over a year earlier to 56.06 trillion won and operating income jumped 89 percent to 8.84 trillion won.
Increased sales of smartphones were the key source of its stellar profit. Samsung, which overtook Apple Inc. as the top smartphone maker last year, said its operating profit from the division that makes and sells smartphones and tablets more than doubled to 5.44 trillion won in the fourth quarter, from 2.56 trillion won a year earlier.
The company’s component divisions that make semiconductor products and display panels also benefited from a rise in demand for smartphones. Sales of mobile processors that power popular devices such as Apple’s iPhones and Samsung’s own Galaxy smartphones boosted the bottom line.
The recovery in the display panel division was also led by strong sales of advanced mobile-phone screens called OLED, which are mostly found in high-end Samsung smartphones. The display division posted 1.11 trillion won in profit compared with a small loss a year earlier.
Analysts said Samsung will likely to see a continued rise in smartphone sales this year, especially in low- and mid-priced models where it sees no competition from Apple. Analysts forecast Apple, which keeps its iPhone price high, will sees iPhone sales plateau in coming years as more consumers snap up cheaper phones and more variety in screen sizes. Bullish analysts forecast Samsung smartphone shipments to rise as much as 50 percent this year from 2012.
Market researcher ABI Research said last month Samsung’s 2012 smartphone market share topped 30 percent. In comparison, it said Apple’s market share will peak at 22 percent in 2013 and remain flat through 2018, seeing a widening gap with Samsung.
Still, Apple’s business has been more profitable because of the high price of the iPhone, which generates a larger profit per sales. Samsung, which makes dozens handset models a year and customizes them for mobile operators, also sells cheaper smartphones and spends about three times more on the expense called selling, general and administrative expense that include marketing and advertising costs for to promote its Galaxy brand.
Samsung’s SG&A expense amounted to 12.67 trillion won ($11.84 billion) in the fourth quarter, 23 percent of its sales. Apple’s SG&A expense was $3.85 billion in the same period, just 7 percent of its sales.
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