Korean tech titan posts record sales, profit in Q4

Samsung Electronics logged record sales and operating income in the last quarter of 2011, with some insiders claiming that more than half of this derived from its smartphones, such as the bestselling Galaxy S II.

The world’s largest manufacturer of flat-screen TVs, computer memory chips and smartphones logged sales of 47 trillion won ($40.4 billion) and an operating profit of 5.2 trillion won in the most recently ended quarter, it announced in its earnings guidance yesterday.

Both were new milestones in the company’s 42-year history, marking respective jumps of 12.3 percent and 72.8 percent from the corresponding period one year earlier.

And in a year when Samsung eclipsed its chief rival Apple as the top seller of smartphones worldwide, insiders say these were the secret to its success in 2011 as it also battled with lower yields from its semiconductor business. Samsung sold about 32 million smartphones in the fourth quarter, according to an estimate by Dongbu Securities.

The Galaxy S II, which became available in May, sold over 10 million units in December, reaching that mark quicker than any other Samsung mobile device.

But in keeping with tradition, Korea’s tech titan did not provide net income figures or a breakdown of divisional earnings in its preliminary report, making the quarterly figure impossible to confirm. It will disclose the audited results later this month.

Meanwhile, the company got another boost from the proceeds of its recently closed deal with Dublin-based Seagate Technology.

Samsung sold its money-losing hard drive disk unit to the company.

For the whole year, Samsung recorded 164.7 trillion won in sales, another all-time high, and 16.15 trillion won in operating profit, beating 150 trillion won and 15 trillion won for the second consecutive year.

Analysts estimate that its mobile communications division, which is responsible for devices like the Galaxy S and Galaxy Tab, saw sales rise 30 percent in Q4 2011 in annualized terms, while operating profit skyrocketed 80 percent.

“The mobile business is generating a huge chunk of profit right now,” James Song, a Seoul-based analyst at Daewoo Securities, told Bloomberg. “It may be getting harder for Apple to catch up because they only have a limited number of models.”

Samsung saw its smartphone sales more than triple to 27.8 million units in the third quarter, again in annualized terms, as it overtook Apple to become the world’s top smartphone vendor, according to market researcher Strategy Analytics.

Some observers speculate that Samsung will also dethrone Nokia in the mobile phone arena soon.

Proceeds from the Seagate deal also helped Samsung attain record-level earnings, said James Chung, a Samsung spokesman.

The deal was announced last April and completed last month.

Seagate, a hard drive manufacturer, bought Samsung’s hard drive disk business for $1.38 billion as part of a deal that also left Samsung with a 9.6 percent stake in Seagate.

Diversification the key

Samsung has been tweaking its organizational structure for some time now, selling off or downsizing faltering businesses and investing in or opening new ventures in lucrative areas.

The company recently merged with its struggling light-emitting diode affiliate, bought out Sony’s stake in the liquid-crystal display joint venture they set up in 2004 and announced plans to set up a joint venture with companies like Japan’s NTT Docomo to provide nonmemory chips for long-term evolution, a fourth-generation wireless network that aims to become the new standard in Korea.

“Samsung has finished its annual business reshuffle, and that will help it solidify its dominance in the global market,” said Shin Hyeon-joon, a Dongbu analyst.

Other industry insiders say that moves to diversify its business portfolio, especially its ailing chip business, explain why Samsung is faring better than its rivals despite contending with falling chip and panel prices.

They believe brisk sales of chips and mobile phone displays made up for losses in this area.

Sources estimate that the company’s chip division saw profit fall 11 percent in the latest quarter, while the display division was dealt an unenviable hand as its profit plummeted from 100 billion won a year earlier to 6.5 billion won due to lower prices.

However, as consumers the world over accelerate their adoption of smart devices from cell phones to TVs, most industry watchers see another boom on the cards for Samsung this year.

“With the help of its lucrative smartphone business, Samsung will overcome lingering problems such as external economic uncertainties. We expect it to achieve 21.3 trillion won in operating profit this year, which would be a new record,” said Seo Won-seok, an analyst at Korea Investment & Securities.

By Kim Hyung-eun [hkim@joongang.co.kr]