Samsung Electronics Co. said quarterly profit soared 76 percent, boosted
by the popularity of its Galaxy smartphones, which outsold the iPhone
for a fourth straight quarter.
But the company said Friday it expects
earnings to decline during the current quarter because of seasonally low
demand for consumer electronics. It is also leaving its 2013 capital
expenditure at the same level as last year at 23 trillion won ($21.5
billion), underlining uncertainty about the global economy and declining
demand for personal computers.
The strong South Korean won is
also becoming a negative for Samsung. It expects more than 3 trillion
won will be shaved from its 2013 operating profit due to the stronger
local currency. Samsung's shares fell as much as 3 percent after
Net profit for the final quarter of 2012 totaled
7.04 trillion won ($6.6 billion), a 76 percent surge from 4.01 trillion
won a year earlier. Analysts had expected 6.95 trillion won in net
profit, according to financial information provider FactSet. Sales rose
19 percent over a year earlier to 56.06 trillion won and operating
income jumped 89 percent to 8.84 trillion won.
Increased sales of
smartphones were the key source of its profit growth. Samsung, which
overtook Apple Inc. as the top smartphone maker last year, said its
operating profit from the division that makes and sells smartphones and
tablets more than doubled to 5.44 trillion won in the fourth quarter,
from 2.56 trillion won a year earlier.
Most analysts believe the
Suwon, South Korea-based Samsung shipped more than 60 million
smartphones, including the Galaxy S III and Galaxy Note II, during the
three months ending in December, which would put the year's smartphone
sales at more than 200 million. Apple said it sold 47.8 million iPhones
in the quarter.
Hong Kong-based research firm Counterpoint
Research said Samsung took 33 percent market share in the fourth
quarter, compared with Apple's 21 percent. Another market researcher IDC
put Samsung's share at 29 percent versus Apple's 22 percent.
company's component divisions that make semiconductor products and
display panels also benefited from a rise in demand for smartphones.
Sales of mobile processors that power popular devices such as Apple's
iPhones and Samsung's own Galaxy smartphones boosted the bottom line.
recovery in the display panel division was also led by strong sales of
advanced mobile-phone screens called OLED, which are mostly found in
high-end Samsung smartphones. The display division posted 1.11 trillion
won in profit compared with a small loss a year earlier.
said Samsung will likely see a continued rise in smartphone sales this
year, especially in low- and mid-priced models where it doesn't face
competition from Apple. Some analysts, including Young Park at Woori
Securities, forecast Samsung smartphone shipments to rise as much as 50
percent this year from 2012 to over 300 million units.
executives said during the conference call with investors that
smartphone demand will ease in the current quarter without giving
guidance for the company's performance. But analysts said that Samsung
could be little affected by market demand thanks to its variety of
products that range from affordable to expensive devices.
though they said demand for smartphone will slow down in the first
quarter, Samsung will likely buck the industry trend and its own
smartphone sales will go up," said Byun Han-joon, an analyst at KB
Investment & Securities.
Apple, which keeps its iPhone price
high, might see iPhone sales plateau in coming years as more consumers
snap up cheaper Android phones.
Still, Apple's business has been
more profitable because of the high price of the iPhone, which generates
a larger profit per sales. Samsung, which makes dozens of handset
models a year and customizes them for mobile operators, also sells
cheaper smartphones and spends about three times more on expenses such
as marketing and advertising costs to promote its Galaxy brand phones
Counterpoint Research estimates Apple, though it
sold fewer handsets than Samsung, took 70 percent of profit in the
handset market during the fourth quarter, while the South Korean rival
claimed 25 percent.
Samsung is expected to introduce a new
flagship smartphone in its Galaxy S series as early as April, which
analysts say will shore up its bottom line. The company said consumers
seeking to replace its current handset and get a faster wireless
connection through LTE networks will drive the demand for new models,
easing concerns that sales would slow because of high rates of
smartphone use in developed markets. Part of its strategy to command
higher prices from consumers has been adding new hardware features, such
as a digital pen in the Galaxy Note series.
display technology, which allows tablet computers to fold into mobile
phones or bend the edge of the screen, is an effort to make its products
stand out from others and to shore up its profit. But such technology,
which was shown in public earlier this month in Las Vegas, will still
need more time for mass production.
Samsung said its profit will
be hurt by unfavorable foreign exchange rates this year. Robert Yi, head
of Samsung's investor relations, said the negative impact from the
foreign exchange rates will exceed 3 trillion won ($2.8 billion), with
the loss largely coming from the firm's exposure to the euro.
Samsung at CES 2013