Samsung profits rise 15% in Q2, but with worries

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Samsung profits rise 15% in Q2, but with worries

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Samsung Electronics reported on Thursday that second-quarter operating profits were up 15.4 percent from the previous quarter, to 6.9 trillion won ($5.9 billion). Revenue was up 3 percent quarter-on-quarter to 48.54 trillion won, with increased sales of memory chips, mobile application processors and new TV models

But compared to results in the second quarter of 2014, revenue was down 7.3 percent and profits fell 4 percent. The results were influenced by disappointing sales of Samsung’s flagship Galaxy phones.

Introduced in April, the Galaxy S6 and S6 Edge did not strike a spark, resulting in an operating profit for the IT and mobile division that was only 0.7 percent better than the first-quarter results. The 2.76 trillion won in profits were a drop of nearly 38 percent from the division’s performance in the same quarter of 2014.

The best news was from the semiconductor division. “Despite this being a low season for the memory business, earnings remained steady due to an increase in high value-added products for mobile devices and servers, as well as an increase in the average density (of chips),” the company said in a release.

At 3.4 trillion won, the division’s quarterly profits were the highest in almost five years; they peaked at 3.42 trillion won in the third quarter of 2010.

The company sold 89 million mobile phones in the second quarter, down 6.3 percent from the first quarter. Sales of tablets were flat at about 8 million.

“Despite the launch of the Galaxy S6, the improvement to earnings was quite marginal due to low smartphone shipments and an increase in marketing expenses for the new product launches,” a Samsung press release said.

The IT and mobile division is crucial to Samsung. It contributed more than half of corporate revenue for the quarter; the semiconductor division contributed less than a quarter.

“Sales of Galaxy S6 and lower-end smartphones failed to meet expectations, as demand from China and other emerging markets fell,” said Lee Jung, an analyst with Eugene Investment & Securities. “Improved earnings in the third quarter can’t be expected because demand for smartphones, LCDs and computers is expected to continue weakening.”

Samsung said it expected smartphone demand in the latter half of the year to increase from that of a year ago, but the growth rate may slow. It pledged to concentrate on keeping its share of high-end sales by lowering the price of its S6 and S6 Edge and introducing new large-screen models, the Galaxy Note 5 and S6 Edge Plus, which will be released in August.

The company was upbeat about semiconductor prospects. It expects demand for high-density standard and mobile DDR memory to increase, and says it will meet that demand with additional production of chips using 20-nanometer traces.

It also sees good demand ahead for its NAND products as the computer industry moves to higher-density storage and wider use of solid state drives.

Samsung shares fell 3.8 percent, their biggest tumble in almost four months, to close at 1,215,000 won Thursday. The company said it would double its interim dividend to 1,000 won per share.


BY SEO JI-EUN [seo.jieun@joongang.co.kr]

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