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 The South Korean tech giant lost market share for three consecutive
quarters up to July-September, and analysts say the trend likely
continued in the October-December period thanks to competition from
Apple Inc's new iPhones and cheaper Chinese rivals like Xiaomi Inc.
Still, expectations of healthy memory chip demand and improvements
in the mobile business on the back of new mid-to-low tier
smartphones are buoying hopes that Samsung has at last staunched the
bleeding in quarterly earnings.
"I think the company will show a turnaround," said CIMB analyst Lee
Do-hoon, pointing to the positive outlook for Samsung's foundry and
display panel businesses this year.
Samsung said its fourth-quarter operating profit is likely to be 5.2
trillion won ($4.74 billion), beating a mean forecast of 5 trillion
won from a Thomson Reuters I/B/E/S survey of 44 analysts.
The outlook means Samsung's 2014 profit will probably be 25 trillion
won, the weakest in three years, although it marks a rebound from
the third-quarter's 4.1 trillion won profit which was the firm's
lowest quarterly result in more than three years. The company is
expected to release its annual results around the end of January.
Samsung shares were trading 0.5 percent higher as of 0310 GMT,
compared with a 1.1 percent rise for the broader market.
"There were concerns about the mobile division but it looks like the
won's recent weakness against the dollar and the Galaxy Note 4
impact helped," HMC Investment analyst Greg Roh said, referring to
solid sales of Samsung's latest flagship phone.
"I expect profits to continue improving through at least the second
quarter of 2015."
Several analysts tipped the semiconductor division to have earned
more than the cash cow mobile business in October-December, buoyed
by healthy demand for memory chips from personal computers and
smartphones.
The company did not provide a breakdown of its earnings figures in
Thursday's outlook, but a person with direct knowledge of the matter
told Reuters that components sales picked up across the board, with
healthy demand for memory chips and higher liquid crystal display
panel prices.
The mobile division's contribution to Samsung's profit has slipped
from about 68 percent at its peak in 2013 to about 44 percent in the
third quarter, as its high-end offerings lost out to Apple's iPhones.
Meanwhile buyers in booming emerging markets like China have opted
for cheaper devices rather than Samsung's flagship Galaxy series.
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The mobile division's fourth-quarter profit improved slightly from
the previous quarter due to a pickup in sales of premium products
like the Galaxy Note 4 and lower marketing costs, the person with
knowledge of the matter said, requesting anonymity because they were
not authorized to speak publicly. But overall smartphone shipments
fell, the person added.
Analysts say the company's new focus on mid-to-low tier smartphones
will squeeze margins and cap profits, offsetting the benefits of the
expected increase in sales.
"It'd be hard to expect a sharp pickup in earnings from the mobile
division in the absence of a hit product," Korea Investment Trust
Management Baik Jae-yer said.
The median forecast from a Thomson Reuters I/B/E/S survey of 52
analysts tips a 23.8 trillion won profit for 2015, which would mean
a second straight annual decline if Thursday's profit guidance is
confirmed.
Samsung is talking up its internet of things-related businesses such
as the smart home as the next big thing, while launching new quantum
dot televisions and metal-body smartphones to boost earnings. But
investors do not expect a profit surge from Samsung in the near
term.
"What Samsung needs to show under the new regime of Vice Chairman
Jay Y. Lee is stabilization, and that includes earnings," HDC Asset
Management fund manager Park Jung-hoon said ahead of Samsung's
guidance.
(Additional reporting by Kahyun Yang; Editing by Stephen Coates)
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