Samsung Scores Impressive Quarterly Results

on Oct 5, 2012
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Samsung (LI:SMSN) exceeded expectations by posting record quarterly profits of $7.3 billion (£4.5 billion), nearly double last year’s figures, thanks to the strong sales of its flagship smartphone and high-end TVs.

According to the Financial Times, Samsung’s revenue for the quarter was between $46 and $47.7 billion (£28.4 and £29.5 billion), a 26 percent increase at the mid range from the $37.2 billion (£23 billion) registered a year before.
The main driving power of the company’s impressive performance was its mobile division, which accounts for around two thirds of total group profit. Reuters reported that smartphone shipments topped 58 million led by the Galaxy S III’s 20 million handsets sold worldwide. The overwhelming dominance of the mobile sector has delivered an attractive quarterly report but also raises the spectre of potential dangers to the South Korean giant.

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!m[](/uploads/story/531/thumbs/pic1_inline.png)Byun Han-joon, an analyst at KB Investment & Securities:
“The biggest risk for Samsung is competitive product line-ups from its rivals such as the iPhone 5. Because handsets drive most of its profits, one misstep in handsets could result in losses for the whole Samsung group,”
Smartphone sales managed to make up for reduced profits from the chip business as prices of the dynamic random access memory (DRAM) chips, used in both mobiles and computers, plunged 14 percent in September. According to analysts, DRAM chips now sell for less than what it costs most manufacturers to make them, meaning earnings will be thinner than ever.

The fourth quarter is expected to be tougher for Samsung as it will have to compete with the newly released iPhone 5. The company is hoping the second instalment of its Galaxy Note phone-cum-tablet, expected to be launched this month, will outsell the initial model by as much as three times.
According to analysts, the Galaxy Note II, a tuned-down, cheaper version of Galaxy S III could potentially help deliver even higher fourth-quarter profits. Nomura predicts October-December profit for Samsung to be up 10 percent from the $7.3 billion (£4.5 billion) registered in July-September.

In the third quarter Samsung lost a major legal battle with main competitor Apple (NASDAQ:AAPL) and faced damages bill of more than $1 billion for patent infringement. A month later the South Korean giant has not given up on repealing the fine as new evidence suggests that one of the jurors, Velvin Hogan, could have been prejudiced in his verdict.
According to Bloomberg, Mr Hogan failed to disclose the fact that he had been involved in lawsuits and didn’t inform the judge that he had filed for bankruptcy in 1993 after being sued by his former employer Seagate Technology. What’s the connection? Turns out that Samsung has a “substantial strategic relationship” with Seagate – it is its largest shareholder. Hogan has denied all allegations: “I’m willing to go in front of the judge to tell her that I had no intention of being on this jury, let alone withholding anything that would’ve allowed me to be excused.” Judge Koh is expected to go over the dispute in December, when a hearing has been appointed on various motions and issues connected to the case.

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