Samsung takes handset lead and 80% profit leap
Smartphone sales deliver more than 70% of Q1 operating income as Korean firm rides high on mobile and premium TVs
Published: 27 April, 2012
As expected, Samsung looks to have grabbed Nokia's place at the top of the handset market after an unbroken run of 14 years, as the Korean firm beat estimates in its first quarter, mainly on the back of the Galaxy smartphone range and its TVs.
Samsung had previewed the results earlier in the month so the strong quarter came as no surprise but the firm added details about the strong contribution of Galaxy's growing success. For the group, net income was up 81% year-on-year to KRW5.05 trillion ($4,4bn), well ahead of analyst predictions and its highest quarterly profit since 2008. Sales were up 22% to KRW45.3 trillion.
More than 70% of operating income came from the mobile phone division, where profit almost trebled and Samsung sold 93.5m units, giving it 25% share. This was well ahead of Nokia's 82.7m, though the Korean firm may never achieve the 40% presence to which its Finnish rival was accustomed in its heyday, given the tough competition from Apple and others. According to Strategy Analytics, Apple is now in third place with 9.5% of the cellphone sector but once again ceded its smartphone leadership to its Korean bête noir in Q1.
While Nokia slipped in key emerging markets like China during the first quarter, Samsung, also traditionally strong in such territories, cited "remarkable demand" in the newer economies. "Growth is especially remarkable in emerging markets led by China, Southeast Asia and the Middle East," said mobile phone VP Kim Hyun Joon on the earnings call.
And analysts only expect uptick in the current Q2 as new models are released, including the long awaited Galaxy S3, which promises a quad-core processor and the latest generation of AMOLED display.
Operating profit at the mobile business was KRW4.27 trillion won, also well ahead of estimates, driven by an 86% year-on-year leap in revenues. Samsung is targeting a doubling of its smartphone and tablet sales for the full year, and aims to increase its overall handset shipments to 380m from last year's 300m.
The blot on the horizon at Samsung was the chip business, where operating profit was down 54% to KRW760bn, lagging market forecasts. The unit will benefit from rising smartphone sales but it is pressurized by falling memory prices and by conflicts of interest when selling to Samsung's handset rivals. In particular, that could squeeze its business from Apple, which procures chips, foundry services, displays and other components from Samsung, accounting for an estimated 7% of its sales, even though the firms are fierce handset competitors and engaged in a string of patent lawsuits.
In contrast to rival Sony, Samsung's TV business was a high point. It achieved market leading 25% share despite an overall decline in the segment for the first time since 2004, and saw a major shift towards sales of premium TV models, driving an almost sevenfold increase in operating income to KRW530bn. Samsung's display unit made an operating profit of KRW280bn, reversing last year's loss of KRW230bn.