Smartphones will be Samsung's main growth this year
Success in high end handsets cushions it from Q4 pressures, delivers record annual profit
Published: 28 January, 2011
READ MORE: Financial | Samsung | Handset
Samsung has finally broken through in smartphones, and the devices were the star of its fourth quarter, propelling the Korean firm to a 12.6% year-on-year rise in net profit.
Profit was KRW3.42 trillion ($3.06bn), better than the forecast of KRW3.05 trillion, while revenue rose 6.7% to KRW41.9 trillion. Full year profit was a record at KRW16.15 trillion, more than 50% better than the previous record of 2004 and up 65% on 2009.
However, the boom in smartphones in the last quarter of the year cushioned the firm from some other difficulties, with two key divisions - memory chips and LCD displays - posting far smaller profits in Q4 than in the previous quarters of the year. And the TV and consumer goods unit suffered its second quarterly loss in a row.
The cellphone company was the only one where results improved both on Q409 and the earlier periods of 2010, and executives said they were counting on continuing growth in handsets to be the highlight, and the profit leader, for most of 2011.
"With global economic uncertainties remaining, we continue to expect some tough business environments in 2011 such as intensifying price competition for set products and price declines for major component products," said Robert Yi, Samsung's investor relations chief. "We expect the traditional earnings pattern of a weak first half, with a strong second half, to return in 2011."
Nam Tae-hyun, an analyst at IBK Securities, told Reuters: "The strong business momentum in its mobile business will continue on strong sales of its smartphones and tablet PCs and that would help make up for any other business underperformers."
The chip business had the highest profit margins, up to 19.5%, but those in handsets were improving too, thanks to the shift to higher end models. The cellphone division reported an operating margin of 11.9%, up from 10.3% a year ago and 10.2% in the third quarter. Samsung shipped 80.7m cellphones in the fourth quarter, up 17% from 68.8m in the fourth quarter of 2009. That brought sales for the full year to 280m units, up 23% and outpacing the total market.
Samsung announced it would introduce the successor to its Galaxy S smartphone during the first half of 2011, featuring a dual-core processor and Super AMOLED Plus display. It repeated its target of selling 60m smartphones this year, which would double its 2010 figure.
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