Samsung Tops Forecasts, But Stays Under a Cloud

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Samsung Tops Forecasts, But Stays Under a Cloud

Samsung Electronic Co.'s second-quarter results beat the market's expectations, but analysts said the earnings outlook for Korea's most profitable company is bleak.

Although Samsung posted a 22 percent sales increase in its telecommunication business, the chipmaker's operating profit for the quarter ending June 30 shrank to 600 billion won ($459.4 million), far less than the more than 1.4 trillion won of profit in each of the five most recent quarters. Casting a dark cloud over the company's future earnings performance is the gloomy outlook for the global semiconductor industry, where the firm has suffered its biggest decline in operating income.

According to the company, its semiconductor sales dropped 27 percent from the first quarter to 2.2 trillion won, with operating profit from the memory chips plunging 74.8 percent to 260 billion won.

Despite the steep declines, Samsung performed better than its global rivals. Major chipmakers such as Korea's Hynix Semiconductor Inc., Germany's Infineon and the United States' Micron Technology lost money in the second quarter.

Given the rapid decline in the semiconductor business, Samsung could post a lost in the quarters to come, analysts said.

"We cannot rule out the possibility that Samsung will see red ink in the chipmaking business in the third quarter," Chun Woo-jong, an analyst at SK Securities Co., said. "This is because the global price for dynamic random access memory chips will not likely rebound in July or August."

A number of chipmakers have announced production cuts to cope with sluggish demand; Samsung said it has no such plans.



by Kim Jun-hyun

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