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Samsung posts record net profit on smartphone sales Samsung posts record profits on Galaxy phone sales
(about 4 hours later)
Samsung Electronics has reported record profits in the three months to September, led by strong sales of its Galaxy range of smartphones.Samsung Electronics has reported record profits in the three months to September, led by strong sales of its Galaxy range of smartphones.
Net profit was 6.5tn won ($5.9bn; £3.7bn), a 91% jump from a year earlier. Net profit was 6.5tn won ($5.9bn; £3.7bn), up 91% from a year earlier.
Strong demand and improved profitability at its display panel unit also boosted earnings. href="http://www.samsung.com/us/aboutsamsung/news/newsIrRead.do?news_ctgry=irnewsrelease&page=1&news_seq=20304&rdoPeriod=ALL&from_dt=&to_dt=&search_keyword=" >The South Korean phonemaker was also boosted by strong demand at its display panel unit.
However, increased competition and its legal tussles with Apple have raised concerns over its future performance. The results come after quarterly profits from Apple - its biggest rival in phones and tablets - disappointed some investors.
"There are concerns that Samsung's earnings would peak this year," said Lee Sun-Tae an analyst at NH Investment & Securities. While Samsung has enjoyed tremendous success with its Galaxy range of smartphones, other manufacturers have been releasing new models, crowding the marketplace.
'Not sexy enough' Last month, Apple started selling the latest version of its iPhone and this week, launched a smaller version of the best-selling iPad. On Thursday, it announced profits in the last quarter were $8.2bn, up from $6.6bn last year.
While Samsung has enjoyed tremendous success with its Galaxy range of smartphones, other manufacturers have been releasing new models, crowding the market space. Records broken
Last month, its biggest rival Apple launched the latest version of its iPhone. Samsung expects market competition to intensify but "we will do our best to sustain our earnings momentum throughout the fourth quarter by implementing strategies we have developed for our businesses", said Robert Yi, head of investor relations.
Meanwhile, HTC and Nokia have also introduced new models powered by Windows 8, as the two firms look to regain some the market share they have lost in recent times. The firm said its flagship Galaxy SIII smartphone has been a key driver in raising profit margins.
"The business environment remained difficult with global economic uncertainties persisting amid the fiscal concerns in the US and Europe.
"However, we continued to break our quarterly profit records," Mr Yi added.
The display panels unit at the firm had revenues of 8.46tn won, up 19% from the previous year. The unit is now profitable.
And the firm expects a "flurry of new mobile devices hitting the market" to boost sales of application processors and image sensors it makes that power smartphones and tablet PCs.
'Not sexy enough?'
Analysts said that increased competition means that firms may have to lower their prices to attract buyers as well as spend more on their marketing campaigns - which will dent their profit margins.Analysts said that increased competition means that firms may have to lower their prices to attract buyers as well as spend more on their marketing campaigns - which will dent their profit margins.
Samsung, which derives the bulk of its earnings from smartphone sales, is likely to feel the affect of any such moves.Samsung, which derives the bulk of its earnings from smartphone sales, is likely to feel the affect of any such moves.
"It'll be difficult for Samsung to maintain such a high profit margin from handsets as the market gets crowded," said Nam Dae-Jong, of Hana Daetoo Securities. However, increased competition and its legal tussles with Apple have raised concerns over its future performance.
At the same time, analysts said Samsung may find it tough to boost its share in the tablet PC sector, not least because of the popularity of Apple's iPad and the launch of the mini version of the same. "There are concerns that Samsung's earnings would peak this year," said Lee Sun-Tae an analyst at NH Investment & Securities.
"It will take time for Samsung to narrow the gap with Apple in the tablet market," said Mr Lee. "It will take time for Samsung to narrow the gap with Apple in the tablet market. Samsung's Galaxy Tab tablet PCs are not sexy enough to oversell Apple's iPad."
"Samsung's Galaxy Tab tablet PCs are not sexy enough to oversell Apple's iPad."
Legal tusslesLegal tussles
Samsung's success in the smartphone and tablet PC sectors has been accompanied by legal tussles with its biggest rival, Apple.Samsung's success in the smartphone and tablet PC sectors has been accompanied by legal tussles with its biggest rival, Apple.
The two firms have filed legal cases against each other in more than 10 countries, each accusing the other of violating its patents.The two firms have filed legal cases against each other in more than 10 countries, each accusing the other of violating its patents.
Earlier this year, a court in the US ruled that Samsung had violated some of Apple's patents and awarded the US firm $1.05bn in damages.Earlier this year, a court in the US ruled that Samsung had violated some of Apple's patents and awarded the US firm $1.05bn in damages.
Samsung is appealing against the ruling.Samsung is appealing against the ruling.
On Wednesday, in a preliminary ruling, a judge at the US International Trade Commission, which has the power to block import of products into the US, said that Samsung had infringed four of Apple's intellectual property patents.On Wednesday, in a preliminary ruling, a judge at the US International Trade Commission, which has the power to block import of products into the US, said that Samsung had infringed four of Apple's intellectual property patents.
Meanwhile, Samsung has tasted some success in countries such as the UK and Netherlands.Meanwhile, Samsung has tasted some success in countries such as the UK and Netherlands.
Analysts said that while the cases seemed to have had little impact on Samsung's growth, it has raised concerns about how they may affect it in the future.Analysts said that while the cases seemed to have had little impact on Samsung's growth, it has raised concerns about how they may affect it in the future.
"Uncertainty remains about its patent lawsuits with Apple, which weighs on its shares," said Eon Nam-Joong, of Consus Asset Management."Uncertainty remains about its patent lawsuits with Apple, which weighs on its shares," said Eon Nam-Joong, of Consus Asset Management.