Thursday, January 05, 2012, 10:16 pm PT (01:16 am ET)
Surging smartphones drive record profits for SamsungSamsung posted record preliminary quarterly profits on Friday, largely due to continued growth in smartphone sales, though it also saw a boost from several one-time gains.
The South Korean handset maker reported 5.2 trillion won ($4.5 billion) in operating profit from the December quarter, besting a consensus forecast of 4.7 trillion won ($4.1 billion), as noted by Reuters. However, company officials cautioned that actual profit could fluctuate by 200 billion won when a more detailed earnings report arrives later in January.
The current results would surpass Samsung's previous record of 5.0 trillion won in profit from the second quarter of 2010. Samsung's fourth quarter 2011 performance is also a marked improvement from the third quarter, when record handset profits were offset by poor performance from its semiconductor and display businesses.
Samsung has seen a rapid ascent since it turned its attention to the smartphone market in 2010. In the third quarter of 2010, the company had just 7.5 million global smartphone shipments, compared to an estimated 27.8 million units in the third quarter of 2011, according to one market research firm.
The company is believed to have achieved 25 percent sequential growth in smartphone shipments to reach a record 35 million units in the last quarter of 2011. Apple and Samsung could end up in a close race for the title of world's largest smartphone vendor during the December quarter, as one recent analysis has suggested Apple may also have shipped 35 million iPhones during the period.
While surging smartphone sales did play a substantial role in Samsung's increased profits in the most recent quarter, it also benefited from a one-time gain of 500 billion won for selling its hard disk drive business to Seagate, as well as "reduced mobile provisions involving royalty payments," the report noted analysts as saying.
Looking ahead, analysts were generally upbeat about Samsung's prospects, especially for smartphones. BNP Paribas and Korea Investment & Securities expect Samsung to sell 170 million smartphones in 2012, according to the report.
"Samsung has traditionally seen its first-quarter profit drop from the fourth quarter, but profit will hold up well, reaching between 4.5 trillion won and 5.0 trillion won, with smartphone sales expected to rise further," said Daewoo Securities analyst Song Jong-ho.
Kim Yun-sang, a fund manager at IBK Asset Management, told Reuters: "As expectations for Apple to continue its innovation trail is receding a bit, this will be the year when Samsung solidifies its commanding lead in the smartphone market." It should be noted, however, that the firm has a stake in Samsung.
The growing rivalry between Samsung and Apple over smartphone and tablet dominance has spread to the courtroom. The two companies are engaged in a series of legal disagreements across multiple countries. Most recently, Samsung was denied a preliminary injunction against the iPhone 4S in Italy, its third such rejection in Europe.
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