SEOUL: Soaring sales of the Galaxy smartphone drove record quarterly profit of $5.9 billion at Samsung Electronics, though the South Korean tech giant is sweating over how Europe’s debt crisis is denting demand in its biggest market for televisions and home appliances. The flagship Galaxy smartphones are likely to have stretched their lead over rivals Apple and Nokia – despite a parts shortage that meant it struggled to keep up with stronger-than-expected demand for its latest S III model.
While strong handset sales grab the headlines, more than doubling profit growth, other businesses such as chips and consumer electronics are battling weak prices and demand and a limp euro, which eats away at repatriated profits. In a sign that the euro zone crisis is exercising minds in boardrooms around the globe, Samsung executives said this week the group was operating to a contingency plan.
“Europe is our biggest consumer electronics market and we may have to initiate cost cuts and product price increases should the euro fall further from the current level,” said one executive who didn’t want to be named as the plan is internal. “Our smartphones are flying off the shelves, with some outlets reporting 40-60 percent sales growth, but that’s distorting the overall trading outlook which is more challenging due to the weak global economy and a weak euro.”
Profit from Samsung’s 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 – at a rate of 380 every minute. Current quarter mobile profits are expected to forge further ahead as the latest Galaxy model enjoys a boom before the next iPhone launch. Samsung’s overall third-quarter operating profit is likely to be between 7.3 trillion won and 9.1 trillion won, an increase of as much as 36 percent from the second quarter, according to a Reuters survey of 14 analysts. The mobile business brings in more than 70 percent of Samsung’s earnings.
While the next iPhone, expected later this year, 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. “Earnings will grow further as the semiconductor division will also stage a solid recovery on the back of improving DRAM and NAND demand,” said Jeff Kang, an analyst at Daishin Securities, adding the division could increase earnings by 1 trillion won this quarter.
Source: Kuwait Times
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