Samsung: sales up, profits down

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Samsung: sales up, profits down
Handsets, TVs remain bright spot




By Phil Carson
Story posted: January 15, 2008 - 2:02 pm EDT

Samsung Electronics Co. Ltd. said today that its telecom division is booming, shoring up weakness in its semiconductor division.

Fourth-quarter handset shipments reached 46.3 million units, up a healthy 41% year-on-year, while operating margins for 2007 increased by 1% year-on-year to 11%.

The company increased its projection for 2008 industry-wide handset shipments to 1.23 billion, or 10% growth year-on-year.

Average selling prices at Samsung were down slightly to $148 in the fourth-quarter, from $151 in the prior quarter. About 10% of the company’s fourth-quarter sales were attributed to Ultra Edition handsets, the company’s premium line.

Telecom sales reached nearly $21 billion in 2007, up 7% over the prior year. Operating profit was $2.3 billion, an 11% margin, up 22% year-on-year.

Samsung was the first major handset vendor to report crucial fourth-quarter and full-year numbers today. Analysts, accordingly, looked to the world’s No. 2 handset maker as a bellwether of the industry. Most other top vendors report their earnings next week.

The good news for Samsung’s handset division was offset to a degree by the news that South Korean government investigators yesterday raided the home office of the parent corporation’s chairman and made another raid today on Samsung’s headquarter offices, looking for evidence in a corruption probe based on allegations that the company has made illegal payments to government officials. Samsung does not comment on pending legal matters.

Samsung’s telecom division, predominantly dependent on handset sales, made that unit a continuing bright spot within Samsung Electronics’ five major divisions, which include semiconductors, LCD televisions, digital media and home appliances. Overall, the company reported sales of $67.6 billion in 2007, up 7% year-on-year, with net income of $7.9 billion, down 6% year-on-year. Weaknesses in Samsung’s chip business were offset by strength in both handsets and flat-screen TVs, according to the company’s earnings report.

Samsung attributed the volume and revenue increases to the strong sales of premium phones in developed markets, while its shipments to emerging markets declined between the third and fourth quarters to 33% of shipments, from 37%.

Analysts pointed to Samsung’s bullish, industry-wide projection for the year of 1.23 billion handset shipments, up about 10% year-on-year, as in line with previous projections given by Nokia Corp., the No. 1 handset maker.

Samsung forecast that it would ship more than 200 million units which, if true, would constitute a 25% year-on-year increase for the company. Those sales will come via a refreshed portfolio with touchscreen handsets and other features, including 5-megapixel camera modules, GPS, 3G and smartphone models. Handsets for emerging markets will be upgraded to include cameras and color displays, Samsung said.

Other positive forecasts included “robust” sales of mobile WiMAX equipment for the United States market, presumably for Sprint Nextel Corp., which just announced a new CEO and reportedly is set to cut 5,000 jobs while assuring the industry that its WiMAX plans are proceeding according to plan.