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Samsung posts record Q1 profit of $5bn

Seoul, April 6, 2012

Samsung Electronics posted record quarterly profit of $5.15 billion, driven by booming sales of its smartphones and the Galaxy Note 'phablet', which it hopes will show it has a flair for innovation to match rival Apple.

The Note - part phone, part mini-tablet - with a throwback stylus and screen half the size of the iPad, has sold more than 5 million since launching in October, and is proving a surprise money earner for the South Korean electronics giant that has a reputation as a 'fast follower' rather than design leader.

"Higher-than-expected shipments of the Galaxy Note seem to have given an upside to earnings," said Lee Ka-keun, an analyst at Hana Daetoo Securities. "Note sales will increase further in the second quarter, and handset profit will grow despite a rise in marketing costs related to the London Olympics."

Samsung, which raced to the top of the global smartphone rankings last year with close to a fifth of the market, from just 3 per cent in 2009, is set to go head-to-head with Apple this quarter with the expected launch of a revamped Galaxy S, its flagship smartphone, and Apple's next iPhone.

"They will engage in a full-fledged war," said Hana Daetoo's Lee.

The Note sits somewhere between a small tablet and a big smartphone, and its early success illustrates that a maturing mobile device market can open up new opportunities as users and manufacturers experiment with form. Samsung has driven the Note with its marketing and distribution clout.

"We're seeing a shift in the marketplace and there's room for diversity," says Shivesh Vishwanathan, senior solutions architect at Persistent Systems.

Put together by Samsung's design chief Lee Minhyouk as a smartphone 'taboo breaker', the Note increases the pressure on gadget strugglers HTC, Nokia and BlackBerry maker Research in Motion.

HTC was due to release quarterly results later on Friday that are expected to show net profit shrank by around 70 per cent from a year ago, battered by competition from Apple and Samsung.

Samsung's January-March operating profit was 5.8 trillion won, almost double the year-ago level and above a consensus forecast of 5 trillion won from analysts surveyed by Thomson Reuters I/B/E/S. It also topped the preceding quarter's previous record of 5.3 trillion won. Revenue was 45 trillion won.

Asia's most valuable technology firm worth some $191 billion released its January-March estimates on Friday ahead of detailed quarterly results due on April 27.

High-end margins

Choi Do-yeon, analyst at LIG Investment & Securities, said the bigger-than-expected jump in Samsung's first-quarter earnings, while revenue was in line with forecasts, indicated handset margins were strong.

"Handset margins are estimated to have topped 20 per cent and profits from the division also topped 4 trillion won. This is really a blowout result and there could be more surprises in the coming quarters as other businesses such as chips show recovery," he said.

Apple had an operating margin of more than 37 per cent in the October-December quarter.

Samsung is expected to have shipped a record 44 million smartphones in the first quarter just ended, up by almost 25 per cent from October-December levels, according to a Reuters survey of analysts. – Reuters




Tags: Samsung | Apple | profit | Smartphone | Seoul | Tablet | Phablet |

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