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Samsung Q2 earnings healthy, but miss forecast

(Bloomberg)
(Bloomberg)
The second-quarter operating profit of Samsung Electronics, the world’s largest smartphone maker, will reach 9.5 trillion won ($8.4 billion), while sales will total 57 trillion won to hit an all-time high, the company said in a regulatory filing on Friday. 

The figures fell short of market estimates, which predicted a record-high quarterly profit of 10 trillion won. But experts said the results were still positive considering the sluggish world economy and the sky-high marketing costs Samsung has been bearing for its flagship smartphone line.

On Friday, the company’s stocks closed at 1,267,000 won down 3.8 percent from the previous day.

Compared to the first quarter, Samsung Electronics’ sales rose 7.81 percent, while operating profit rose 8.2 percent. The gap widened on a year-on-year basis, with sales expected to climb almost 20 percent and operating profit showing an increase of more than 47 percent.

“More than 20 million Galaxy S4 handsets have been sold so far, a figure which is within the range of previous estimation. However, the smartphones could have done a little better,” said Lee Sun-tae, an analyst from NH Investment and Securities.

“Despite the overall sales increase of Samsung’s high-end smartphones, a declining profit margin was unavoidable due to the high marketing costs.”

Samsung launched its latest Galaxy S4 in New York ― aimed at strengthening its weakest link, the North American market ― and has been holding a slew of events and campaigns all over the world to promote the phone.

Analysts projected that Samsung’s third-quarter performance will likely improve on the stabilization of DRAM prices and better efficiency of other handset components. They forecast that the firm may even post a new earnings record.

“The Galaxy Note 3 also is expected to be released soon, so that will give further impetus to Samsung to improve in the third quarter,” said Song Jong-ho, a senior analyst at KDB Daewoo Securities.

The latest addition to the Note series is expected to be rolled out in September.

Market watchers, however, said Samsung should diversify and reinforce its mid-end mobile handset lineup by offering higher quality, as demand for such phones is expected to rise further down the road.

They also said the firm should reduce its reliance on mobile phones, citing figures showing that the smartphone market is becoming rapidly saturated. Wearable smart gadgets are one way to go, they said.

Samsung’s mobile business unit accounted for more than 70 percent of its total operating income in the first quarter.

Samsung Electronics releases preliminary reports on sales and operating profits excluding the net income figures and revenue details. The official second-quarter earnings are to be announced later this month. 

By Kim Young-won
(wone0102@heraldcorp.com)

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