Samsung 2Q profit slides 18 percent

[July 29, 2011]  SEOUL, South Korea (AP) -- Samsung's net profit slid 18 percent in the second quarter as weakness in semiconductors and liquid crystal displays countered the electronics giant's growing strength in smartphones.

Samsung, the world's biggest manufacturer of memory chips, LCDs and flat screen televisions, earned 3.51 trillion won ($3.33 billion) in the three months ended June 30, it said Friday in a regulatory filing. Samsung earned 4.28 trillion won the same period last year.

Samsung has suffered this year due to slack prices for electronic components amid oversupply and weak demand. Net profit slumped 30 percent in the first quarter amid declines in memory chip prices and reduced profitability in LCDs and TVs.

Second quarter sales at the Suwon, South Korea-based company rose 4.1 percent to 39.4 trillion won from 37.9 trillion won a year earlier.

"We were confronted with a difficult business environment overall," Robert Yi, a Samsung vice president, said on an earnings conference call. Global economic uncertainties persisted, and consumer demand for products such as personal computers and televisions was "soft."

He added that PC and TV demand weakness may continue in the current third quarter given that the global economic recovery remains unclear.

Yi said Samsung's revenue gain was "mainly due to strong handset performance led by continuing success of our smartphones," though emphasized that smartphones and tablets face intensifying competition. Both operating profit and sales in Samsung's memory business fell as weak global personal computer sales suppressed demand for DRAM, or dynamic random access memory, chips used in the devices, the company said in a release.

Samsung's display panel business racked up an operating loss of 210 billion won, reversal from profit of 880 billion won the year before, with sales declining 9 percent as LCD prices fell.

Yi called the results in that sector "quite disappointing."

Unlike in the past, the company did not provide specific figures for individual product sales volumes and prices during the quarter.

Yi cited "increased risks that the information we provide may adversely affect our own businesses" as among reasons for the company's decision to not give such details.

Lee Min-hee, an analyst at Dongbu Securities in Seoul, said that worries about giving rival companies an edge could be a reason for the move.

"Many competitors are watching their peers' business results," Lee said of technology companies, and can derive information such as manufacturing and operating costs from details about unit sales and prices.

The bright spot in the second quarter continued to be mobile phones. Revenues in the company's mobile communications business, which includes phones, rose 45 percent from the year before. Sales of mobile phones increased from the previous quarter on the back of the company's flagship Galaxy S II smartphone.

Samsung, which ranks No. 2 in mobile phones behind Finland's Nokia Corp., has sold more than 5 million units globally of the updated smartphone since it went on sale in late April.

Samsung expects demand for mobile phones to increase 15 percent in the second half of this year driven by consumers upgrading to smartphones, it said in the release.

Shin Jong-kyun, president of the company's mobile communications business, has said previously that the company's sales target for mobile phones this year is 300 million handsets. Out of that total, the company expects 60 million to be smartphones.

Shares in Samsung, which announced results before South Korea's stock market opened, rose 0.8 percent to close Friday at 844,000 won. The company's stock price has declined 11 percent so far this year.

[Associated Press; By KELLY OLSEN]

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.