July 26, 2012 / 9:00 PM / 5 years ago

Smartphones to power record Samsung profit during Apple lull

A customer tries out a Samsung Galaxy S III smartphone, released by Japan's largest mobile carrier NTT Docomo Inc, at an electronics store in Tokyo June 28, 2012. REUTERS/Yuriko Nakao/Files

SEOUL (Reuters) - Samsung Electronics Co (005930.KS), the world’s top technology firm by revenue, will report on Friday a record profit of $5.9 billion for the June quarter, as rampant sales of its Galaxy S mobile phone helped stretch its lead over Apple Inc (AAPL.O).

Current quarter mobile profits are expected to forge further ahead as the latest Galaxy model enjoys a sales boom before the next iPhone launch, widely expected in October, driving Samsung’s profit to a record of nearly 8 trillion won. The mobile business brings in around 70 percent of Samsung’s earnings.

JK Shin, head of Samsung’s telecoms business, told Reuters on Sunday that sales of the Galaxy S III, the most aggressive competitor to the iPhone, were better than his initial forecast of at least 10 million units in the first two months after its launch in late May.

It is also preparing a sequel to the popular phone-cum-tablet Galaxy Note later this year to counter Apple’s new product releases.

“Samsung will continue to outperform in the third quarter as it’s got compelling new products selling really well,” said Song Myung-seob, an analyst at HI Investment & Securities in Seoul.

“It’s also benefiting from rivals’ failure to offer competitive models in a timely manner that could match Samsung’s product cycle.”

Samsung, which earlier this year ended Nokia’s NOK1V.HE 14-year reign as the top global handset maker, is estimated to have increased smartphone shipments to around 50 million in the June quarter, nearly double the 26 million iPhones Apple sold.

Apple shipments in the June quarter were lower than expected as the European economy sagged and consumers held off on buying ahead of the release of the iPhone 5.

Samsung, valued at $160 billion and the world’s leading maker of TVs, smartphones and DRAM memory chips, said earlier this month its quarterly operating profit will be 6.7 trillion won, up 79 percent from a year ago and 15 percent from the previous record -- 5.85 trillion won in the March quarter.

Profit from the mobile division is likely to have more than doubled to around 4.4 trillion won from a year ago, with sales of around 50 million smartphones - or 380 every minute.

Its semiconductor business is expected to show a small decline in profit due to weak demand for NAND memory chips and computer memory chips.

The flat screen division is seen swinging to a small profit after a global fall in LCD (liquid crystal display) prices stabilised.

The TV and home appliances business is also expected to report a small profit, buoyed by solid sales of high-end TV models with 3D and Internet connectivity features.

While the next iPhone will likely slow Samsung’s handset earnings growth, it will boost the Korean firm’s semiconductor earnings as Samsung is the sole producer of processing chips used to power the iPhone and iPad, and also supplies Apple with mobile memory chips, NAND flash and display screens.

Editing by Neil Fullick

Our Standards:The Thomson Reuters Trust Principles.
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