Expert View - Samsung posts record operating profit of $7.3 bln

SEOUL Fri Oct 5, 2012 5:46am IST

Women walk past an advertisement board promoting Galaxy Note of Samsung Electronics in Seoul April 27, 2012. REUTERS/Kim Hong-Ji

Women walk past an advertisement board promoting Galaxy Note of Samsung Electronics in Seoul April 27, 2012.

Credit: Reuters/Kim Hong-Ji

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SEOUL (Reuters) - Samsung Electronics (005930.KS) reported quarterly profit of 8.1 trillion Korean won on Friday, a fourth straight record quarter and nearly double last year's figure, as strong sales of its Galaxy smartphones more than offset reduced orders for chips and screens from Apple Inc (AAPL.O).

Following are reactions from analysts and fund managers:

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BYUN HAN-JOON, ANALYST, KB INVESTMENT & SECURITIES

"Earnings are set to decline in the fourth quarter. Along with increasing smartphone sales, Samsung will need to spend more on marketing, which will naturally reduce its profits. We expect fourth-quarter earnings at around 7.5 trillion won.

"It's hard to predict exactly when profit will recover, but it is likely to improve from the second quarter, led by semiconductor's recovery.

"The biggest risk for Samsung is competitive product line-ups from its rivals such as iPhone 5s. Because handsets drive most of its profits, for Samsung one misstep in handsets could result in losses for the whole group."

DAVID CHOI, ANALYST, SK SECURITIES

"The earnings estimate appears to be the result of Samsung's mobile phone business, driven by sales of comparatively high-end smartphone models such as the Galaxy S IIIs. Samsung's other businesses such as semiconductors and home appliances saw no drastic changes from the previous quarter.

"Fourth-quarter earnings might not approach the same level as its third-quarter results, but a pronounced dip is not expected as the rising price of NAND flash memory is expected to be reflected in the fourth-quarter results."

NHO GEUN-CHANG, ANALYST, HMC INVESTMENT & SECURITIES

"We expect Samsung's profits in the fourth quarter to decline to around 7.6 trillion won, due to increased marketing spending.

"Profits, however, recover during the second quarter next year to around 8.5 trillion won, as its telecom profits will continue to grow, despite increasing competition."

LEE SUN-TAE, ANALYST, NH INVESTMENT & SECURITIES

"Stronger than expected sales of Galaxy S IIIs and high-end television models appear to have propelled strong earnings growth in the third quarter.

"Fourth-quarter profit will be pressured by one-off expenses of performance payouts and some $1 billion legal provisioning relating to Apple litigation. But excluding these one-offs, core earnings will remain solid and a swing factor is how much Samsung spends in marketing.

"Samsung won't be able to further increase handset profits sharply from the current level but they'll hang on to this level of profit, helped by solid product portfolios. The key for overall earnings momentum depends on how strongly chip business rebounds."

JAMES SONG, ANALYST, KDB DAEWOO SECURITIES

"Better-than-expected telecom earnings may have provided an upside surprise to Samsung's earnings. Sales of high-end smartphones such as Galaxy S III helped raise average selling prices, more than offseting rises in marketing expenses ahead of the iPhone launch."

"Fourth-quarter earnings will depend on how much Samsung will (set aside) provisions for possible fines relating to a lawsuit with Apple. Excluding that, earnings will fall only slightly from the third quarter, with other businesses improving while telecom profits will fall because of iPhone competition and inventory clear-up."

(Reporting by Miyoung Kim, Hyunjoo Jin, Daum Kim, Joyce Lee and Jane Chung; Editing by Richard Pullin)

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