Samsung Electronics Coming on Strong

[Sunite]

Samsung Electronics Coming on Strong
By Kelly Olsen
October 12, 2007 7:32AM

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Samsung is the world's biggest manufacturer of computer memory chips, the world's top producer of flat-screen televisions and ranks No. 2 in mobile phones behind Nokia. Mobile phones and flat-screen TVs were two of the earnings leaders in the third quarter, while memory chips did better than expected despite price declines amid a supply glut.

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   Samsung
   Memory
   LCDs
   Mobile Phones
   Wall Street

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   Samsung Electronics Co., one of the world's top technology companies, reported its first profit increase in four quarters Friday, led by strength in mobile phones and flat-screen televisions.

Signaling confidence in its chip-making business, Samsung also said it would boost capital investment by $1.2 billion for the rest of the year, mostly earmarked for memory chip production.

South Korea's biggest company earned 2.19 trillion won ($2.4 billion) in the July through September quarter, an increase of 1 percent from the same period last year. The gain, which surprised analysts, snapped three straight quarters of lower profit.

Sales during the quarter rose 9.6 percent to a record 16.68 trillion won ($18.16 billion) from 15.22 trillion won a year earlier.

The average estimate of nine analysts surveyed by Dow Jones Newswires forecast net profit of 2.14 trillion won ($2.33 billion). They expected sales to rise to 16.6 trillion won ($18.1 billion).

"The third-quarter earnings results are enough to dismiss concerns over the weakness of Samsung's recent market competitiveness," Chu Woo-sik, head of investor relations, said in statement.

Samsung is the world's biggest manufacturer of computer memory chips, the world's top producer of flat-screen televisions and ranks No. 2 in mobile phones behind Finland's Nokia Corp.

Mobile phones and flat-screen televisions were two of the earnings leaders in the third quarter, while memory chips did better than expected despite price declines amid a supply glut.

Phone sales rose to a record 42.6 million handsets for the quarter, the company said, and during the first three quarters reached 115 million, already exceeding last year's entire annual total of 114 million.

Chu told analysts and investors on a conference call that the company had revised its annual sales volume for LCD TVs to 12 million units, almost double last year's shipments, amid a strong performance.

Still, the company's overall profitability hinges strongly on its chip operations, which are heavily swayed by seasonal and cyclical price swings. Prices slumped in the quarter amid industry overproduction.

Nevertheless, Samsung expressed satisfaction with its performance in the sector and said it plans to increase capital spending by about by 1.1 trillion won ($1.2 billion) the rest of this year, mostly in chips.

Analysts said that's a danger both for the overall industry as well as Samsung.

"It's a risk for a market that's already weak," said Jeffrey Toder, head of Asian technology research for ABM AMRO Asia Ltd. in Taipei.

Samsung manufactures both DRAM, or dynamic random access memory, chips used in personal computers, as well as NAND chips used in digital cameras, music players and mobile phones.

Price pressure in DRAM chips "is going to be a big dragging factor on (Samsung's) earnings into the first half of 2008," said Peter Yu, an analyst at BNP Paribas in Seoul.

Samsung's shares rose as much as 3.1 percent following the early session earnings announcement, before paring gains to finish 0.4 percent higher at 557,000 won ($606).

The share price has languished this year, having fallen 9 percent, lagging other blue chips and the broader South Korean stock market.