Qualcomm Inc (QCOM)

[khemara_qc]

Samsung Electronics Expects 1st Profit Rise in 5 Qtrs (Update1) Listen

http://www.bloomberg.com/apps/news?pid=10000087&sid=a2uk.wCJiVrM

Oct. 14 (Bloomberg) -- Samsung Electronics Co., Asia's biggest maker of semiconductors and mobile phones, forecast its first profit increase in five quarters, citing a rebound in prices of liquid-crystal displays and mobile phones.

A shortage of LCD television panels, higher handset prices, and ``strong'' chip demand will push up net income in the fourth quarter, Chu Woo Sik, head of investor relations at the Suwon, South Korea-based company said during a conference call today. Third-quarter net income fell 30 percent from a year ago to 1.9 trillion won ($1.8 billion), in line with estimates.

The forecast by Asia's largest electronics maker by market value may help ease investor concern that prices of electronic goods will fall further, after disappointing results from LG.Philips LCD Co. and Apple Computer Inc. Samsung also raised its global handset shipments for 2005, ahead of earnings from bigger rivals Nokia Oyj and Motorola Inc. next week.

``Samsung's optimism is a relief,'' said Lee Seung Mun, who helps manage $1.6 billion at Midas Asset Management Ltd. in Seoul. ``Especially with LCDs and LG.Philips, there was a lot of concern out there in the market.''

Shares of Samsung rose as much as 1.8 percent after the announcement and traded 1,000 won higher at 563,000 won at 2:02 p.m. on the Korea stock exchange. The stock has risen 24 percent this year, against a 33 percent gain in the Kospi index.

`Even Better'

Profit and sales in the fourth quarter from the chip, LCD and telecommunication businesses will be ``even better'' than in the third quarter, Samsung's Chu said.

The net income result was in line with the median estimate of 17 analysts surveyed by Bloomberg. Operating profit fell 22 percent to 2.1 trillion won from a year earlier, while sales rose 1.4 percent to 14.5 trillion won. The company was projected to report operating profit of 2.1 trillion won and revenue of 14.7 trillion won, according to the survey.

``Samsung is way ahead of its competitors, and is generating steady profit as increasing shipments and cost-cutting efforts offset price declines,'' said Lee Kun Hak, who helps manages the equivalent of $600 million at CJ Asset Management Co. in Seoul. ``The outlook in the fourth quarter looks positive.''

Chief Executive Yun Jong Yong, 61, said last month that he expects Samsung's full-year profit to fall as much as 20 percent from last year's record 10.8 trillion won, when the company earned more than Microsoft Corp., because of lower product prices.

``The numbers are good,'' said Kishore Suratkal, head of technology research in Asia at Macquarie Securities Ltd. in Hong Kong ``We are actually forecasting a rebound for Samsung across the board.''

LCD Shortage

Samsung said net income fell, partly because of a $200 million charge from the U.S. government for price-fixing on chips. After setting aside $100 million in provisions last year for the case, Samsung yesterday agreed to pay $300 million, the second- largest criminal antitrust fine in U.S. history, for its role in a global scheme to fix prices of computer memory chips.

Shipments of LCDs rose 21 percent in the quarter just ended from the previous three months. Samsung, the world's second- largest LCD maker, said demand for screens will rise 7 percent in the current quarter, leading to a shortage of panels used in televisions that may last until the third quarter of 2006. The company expects to sell 13.1 million LCDs, measuring at least 10- inches diagonally, this quarter, it said.

Operating profit from liquid-crystal displays in the quarter just ended unexpectedly rose 30 percent from a year earlier to 300 billion, while sales from the division rose 41 percent to 2.7 trillion won. The results from the business beat the operating profit of 204 billion won and sales of 2.5 trillion won projected by analysts surveyed by Bloomberg.

Mobile Phones

The results are a contrast to LG.Philips, which on Oct. 11 reported an inventory buildup for some panels and forecast average prices to fall during the fourth quarter, triggering declines of LCD makers' shares across Asia the following day.

Samsung, the world's third-largest mobile phone maker after Nokia and Motorola, said operating profit from telecommunications fell 10 percent to 550 billion won, while sales dropped 5 percent to 4.6 trillion won. Profit and sales fell short of the operating profit of 608 billion won and sales of 5 trillion won median estimate of analysts surveyed by Bloomberg.

Handset shipments rose 10 percent to 26.8 million units in the quarter, with profit margins rising to about 13 percent from about 12 percent in the second quarter, Chu said.

Fourth-quarter shipments, which usually fall from the third quarter because of inventory adjustments, will probably be similar to those of the third quarter and average handset prices will rise, Chu said. Samsung's handset profit margins will probably have a ``sharp'' rise in the first quarter of next year, the company said.

`Upside'

``A profit margin recovery in the LCD and telecommunication businesses will be the pillars of growth,'' said Isaho Nakasho, who oversees $40 million in Asian shares, including Samsung's stock, at Fuji Investment Management Co. in Tokyo. ``Samsung's stock still has about 10 to 15 percent upside from here.''

Samsung, the world's second-largest chipmaker after Intel Corp., said income from semiconductors fell 31 percent to 1.35 trillion won. Sales fell 3 percent to 4.6 trillion won, shy of the record that division President Hwang Chang Gyu predicted last month. Operating income and sales were in line with analysts' estimates.

Chip Prices

Samsung forecast fourth-quarter prices of computer chips known as dynamic random access memory to fall as much as 5 percent from the third quarter, when they dropped 3 percent, amid ``strong'' demand, Vice President Kim Il Ung said during the conference call.

Fourth-quarter prices of Nand flash memory used in products such as Apple's line of iPod music players, will probably fall about 20 percent from the third quarter, less than the 30 percent decline the company had projected in July, as the shortage of the product will probably last another two quarters, Kim said.

Samsung's chip profit decline exceeded that of smaller rival Hynix Semiconductor Inc., which yesterday reported third-quarter net income fell 3.5 percent. Hynix Chief Financial officer Chung Hyung Ryang yesterday said the company expects fourth-quarter DRAM prices to be ``stable to slightly down'' from the third quarter.

Samsung's 2005 capital spending may exceed the 10.27 trillion won budget after the company spent 85 percent of it chip budget, Chu said. Next year's overall spending will probably be similar to what the company invests this year, Chu said.

(Samsung's earnings conference call started at 10 a.m., Seoul time, and can be accessed at {LIVE <GO>}, or at http://www.samsung.com/AboutSAMSUNG/InvestorRelations )



To contact the reporter on this story:
Young-Sam Cho in Seoul at [e-mail]
Last Updated: October 14, 2005 01:02 EDT