Samsung's Profits Stung By Sapping Demand - InformationWeek

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Mobile // Mobile Devices
04:31 PM

Samsung's Profits Stung By Sapping Demand

Cuts in demand for memory chips and LCDs resulted in a 72% decline in profits, but the company's cell phone division was profitable and gained market share.

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Samsung was stung by the sapping demand caused by the global economic slowdown, and its first-quarter profits dropped 72% from a year ago to about $349 million.

The profits beat most analysts' expectations, and it comes after the electronics manufacturer posted its first-ever quarterly loss. The company's mobile phone division rose 2%, which is a bit unexpected considering rivals like Nokia, Sony Ericsson, and Motorola are seeing sluggish demand.

Samsung's telecom business earned $833 million on sales of $7.26 billion, and it had a larger profit margin than Nokia, which is the world's largest cell phone manufacturer. Samsung's average selling price rose to $122, which also bested Nokia.

Samsung has been able to compete well because it has a large portfolio of devices that include low-end handsets and high-powered smartphones like the Omnia HD. The company still said the overall mobile market could decline by about 10% for 2009, but it still expects to ship more than 200 million phones this year.

The company's chip and liquid-crystal display divisions didn't fare as well, though, as steep demand and price decreases led to massive losses. These were once the main moneymakers for the company, but they've been dragging Samsung down for the last few quarters. The company is in the midst of a massive reorganization that will consolidate these losing divisions into a single unit.

Samsung is hesitant to be too optimistic with its forecasts, as it had a strong first half last year and a disappointing second half.

"It is still premature to expect the global economy as well as the consumer demand recovery in the near term," VP Robert Yi said in a conference call.

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