Samsung’s profit soars as Galaxy fends off iPhone 5 challenge
Demand for Galaxy Note II and Galaxy SIII phones helped boost Samsung’s quarterly profit to 89 percent.
SEOUL — Samsung Electronics, the world’s largest maker of mobile phones and TVs, boosted quarterly profit 89 percent as its Galaxy smartphones fended off competition from Apple’s iPhone 5.
Operating profit jumped to a record 8.8 trillion won ($8.3 billion) in the three months ended December, Samsung said in a statement of preliminary results Tuesday. That compares with the 8.5 trillion-won average of 35 analyst estimates compiled by Bloomberg. The company didn’t give net income or unit figures.
Demand for Galaxy Note II and Galaxy S III phones helped Samsung boost revenue 18 percent to 56 trillion won as glitches with mapping software dented sales of iPhone 5s. The Suwon, South Korea-based company’s use of in-house chips and displays gives it an edge in product development and allows it to keep a greater share of sales.
“Earnings will continue flying high,” said Kim Hyung Sik, an analyst at Taurus Investment Securities in Seoul. “Samsung’s wide range of businesses is paying off handsomely.”
The company sold about 62 million smartphones in the quarter, compared with Apple’s 45 million, according to a Daewoo Securities estimate. The iPhone 5 went on sale in September.
Fourth-quarter operating profit may be 200 billion won higher or lower than Tuesday’s estimate when audited results are announced later this month, Samsung said. Sales may differ by as much as 1 trillion won.
Earnings at Samsung’s mobile-phone unit, its biggest profit driver, probably doubled to 5.7 trillion won, according to a Bloomberg News survey of five analysts. The display unit likely made a 1.1 trillion-won profit, compared with a loss a year earlier, according to the survey.
“Samsung was the major beneficiary of slower-than-expected sales of Apple’s iPhone 5,” said James Song, an analyst at Daewoo Securities in Seoul. “The biggest challenge ahead is whether it can maintain its competitiveness in the smartphone market as high-end products are expected to be released by big players like Apple and Google.”
The South Korean company is in a global patent legal fight with Cupertino, Calif.-based Apple, Samsung’s biggest customer as its chips are used in iPhones.
Samsung surged 44 percent in 2012, compared with a 31 percent gain for Apple in New York.
Earnings may have disappointed some investors because expectations were rising ahead of the statement, said Sean Kim, a Seoul-based analyst at Standard Chartered Bank Plc. The company also has to grapple with a stronger won, which dents the repatriated value of overseas sales.
“The biggest risk factor is the strengthening Korean won,” Kim said. “In the longer term, possible price competition in the smartphone space also poses a risk.”
Sales of the Galaxy S III reached 30 million units within five months of its May debut, Samsung said in a Nov. 4 statement. The company also is reaping profits from its Galaxy Note II phone-tablet device, introduced in September, which reached sales of more than 5 million units as of November.