email article 
print
Samsung upbeat on 2010 after record Q3 profit
By Marie-France Han and Rhee So-eui
A visitor walks past a logo of Samsung Electronics on a glass door at the company's headquarters in Seoul October 29, 2009. REUTERS/Jo Yong-Hak
SEOUL (Reuters) - Samsung Electronics <005930.KS>, the world's top maker of memory chips and LCD screens, gave a robust outlook, signaling bigger players are set to further widen the gap over smaller firms in a tech sector recovery.
The South Korean group has made a spectacular turnaround this year, grabbing market share from the likes of Sony <6758.T> and home rival LG Electronics <066570.KS>.
"I don't see any risk in Samsung's competitiveness and there's zero chance supplies will rise significantly," said Song Myung-sup, an analyst at HI Investment & Securities.
"But the macroeconomy remains a factor -- demand may weaken once stimulus plans are removed."
Samsung reported a record quarterly net profit on Friday on resurgent sales, and forecast a strong 2010 even as analysts cited risks of a fast recovering won and higher marketing spending.
Forecast beating results from both Samsung and LG also reflect the broader economic picture, with South Korea posting its biggest growth in 7- years in the third quarter.
Samsung shares ended up 0.7 percent in a broader market <.KS11> down 0.3 percent. Shares in South Korea's biggest company, valued at $90 billion, have gained 59 percent this year, beating a 41 percent gain on the market. The stock is, however, down 13 percent from a record high last month.
Samsung expects the global market for personal computers and handsets to resume double-digit percent growth next year and LCD TV sales to rise nearly 20 percent.
"We expect the global economic recovery to drive demand growth of most IT and consumer electric products ... we are cautiously forecasting our 2010 profitability may improve from that of 2009," said Robert Yi, head of Samsung's investor relations.
Still, the risk remains Samsung and LG may be hit by a firming won currency. Samsung said its fourth-quarter earnings could decline due to the won and marketing expenses.
"Samsung's profit has likely peaked in the third quarter and will start to ease from the fourth quarter, with falling LCD prices and demand leading the way," said Lee Min-hee, a Dongbu Securities analyst.
"I expect Samsung to boost investment from early next year and this increased spending, if revenue doesn't pick up over the near term, could drag on profits for the time being."
For an earnings Graphic, click: http://graphics.thomsonreuters.com/109/KR_SMSG1009.gif
For Samsung earnings statement, click: http://r.reuters.com/pum76f
CHIP MARGINS SOAR
The recovery in Samsung is most evident in its flagship memory chip business, which posted an operating profit margin of 15 percent on a consolidated basis, surging from 4 percent in the second quarter. Several analysts expect the unit to post margins above 20 percent in 2010.
Samsung said it would invest more than 5.5 trillion won ($4.64 billion) in memory chips and around 3 trillion won in the liquid crystal display (LCD) business in 2010, on a consolidated basis, after investing some 7 trillion won company-wide in 2009.
In mobile phones, where Samsung ranks behind only Nokia <NOK1V.HE>, profit margin remained flat at 10 percent despite increased marketing costs and fewer subsidies from mobile operators. Samsung said its global market share in handsets rose over 20 percent for the first time, estimated at 20.8 percent.
July-September net profit rose to 3.72 trillion won ($3.14 billion), beating an average forecast for 3.34 trillion won from analysts polled by Thomson Reuters I/B/E/S. This topped its previous record quarterly net profit of 3.14 trillion won in the first quarter of 2004.
(Additional reporting by Kim Yeon-hee and Yoo Choon-sik; Editing by Jonathan Hopfner and Anshuman Daga)
2009 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies. For additional information on other Reuters media services please visit http://about.reuters.com/media/.
recommend this article
Page: 1Related Newsletters: IBN - IT Weekly Newsletter
