Samsung's Q1 profit falls on weak TV, tablet demand

   Samsung Electronics Co., the world's largest maker of memory chips, liquid crystal display (LCD) panels and TVs, estimated Thursday that its first-quarter operating profit fell 34.2 percent from a year earlier as weak demand hurt its LCD and tablet businesses.

   Samsung estimated its operating income for the January-March period at 2.9 trillion won (US$2.67 billion), compared with 4.41 trillion won a year ago, it said in a regulatory filing.

   The figure, the lowest in seven quarters, was in line with a market forecast of 2.86 trillion won, according to a median estimate of 10 analysts polled by Yonhap News Agency.

   First-quarter revenue was estimated at 37 trillion won, up 6.8 percent from one year earlier, according to the company's earnings guidance. It did not provide figures for each of its four business divisions.

   Shares of Samsung Electronics were trading at 933,000 won on the Seoul bourse as of 9:30 a.m., up 1.08 percent from the previous session.

   Samsung's first-quarter earnings took a beating from weak global demand for TVs, analysts said, which eroded prices of key TV components, such as large-size LCD panels.

   Its LCD division likely swung into the red, compared with 490 billion won in operating profit one year ago, according to analysts at Kyobo Securities Co.

   Samsung's digital media division, which makes its TVs, is also expected to report a big decline in operating profit on higher raw material costs, stiffer competition and lukewarm demand for high-end 3-D TVs and smart TVs.

   Disappointing sales of the Galaxy Tab tablet computer also eroded the company's margin in the first three months of 2011, analysts said, as mobile carriers cut prices for the tablet computer to remove stockpiles amid weak consumer demand.

   "Samsung sold 1.5 million Galaxy Tab computers to mobile carriers in the fourth quarter (of 2010), but sales to consumers didn't live up to expectations, leaving stockpiles of the product," said Lee Seung-woo, an analyst at Shinyoung Securities Co. "Galaxy Tab sales in the first quarter were lower-than-expected and its price was cut, which squeezed the margin."

   Analysts believe that the company's income will bottom out from the current quarter driven by the reviving profit of its mainstay semiconductors, as a supply disruption in Japan and new product launches from PC and mobile makers hike chip prices.

   As the world's second-largest mobile-phone maker after Nokia Corp., Samsung is scheduled to roll out new high-end tablet computers and smartphones in the second quarter, which will help its earnings.

   Samsung was the first major technology firm to release an earnings preview after the devastating earthquake and tsunami hit Japan last month.

   Analysts said the Korean company is poised to benefit from the quake in the short term as a parts supply squeeze from Japan could prompt global electronics makers to look for new component suppliers. Prices of memory chips for personal computers and mobile devices also bounced back after the March 11 earthquake.

   But if power shortages and production disruptions in Japan run long-term, it could hurt Samsung's key partners in Japan. Sony Corp., Samsung's biggest client, based in Japan, made up 4.4 percent of Samsung's revenue in 2010.

   Choi Gee-sung, vice chairman and CEO of Samsung Electronics, said last week that rising crude oil prices, earthquake-hit Japan and weakening demand in advanced economies are the key risks for the tech heavyweight this year.

   Samsung plans to disclose its first-quarter earnings later this month.
(Yonhap News)