Samsung Electronics, the world's top memory chipmaker, on Thursday said quarterly profits remained flat as sluggish computer memory chip prices offset booming sales of flat screens.
But shares in Samsung, South Korea's biggest stock with a market value of about $89 billion, recouped an early fall to trade higher in the morning session, outperforming the wider market's losses, as operating profit beat forecasts.
The outlook for coming quarters is clouded by expectations of further declines in prices of DRAM chips, widely used in personal computers, and NAND flash memory chips, used in digital cameras and portable music players such as Apple's iPod.
While analysts do not expect meaningful improvement in chip prices before the middle of next year, Samsung Electronics, also the world's top maker of large-size LCD screens, should continue to reap hefty profits from its flat screen division on tight supplies and surging demand for sleek computer monitors and TVs.
Samsung Electronics, the most valuable technology company outside the United States, earned a net profit of 2.19 trillion won (US$2.39 billion) in the third quarter ended September, little changed on the year ago number, but well up from the 1.42 trillion won booked in the April-June period.
The result was fractionally above the 2.13 trillion won net profit forecast from 10 analysts surveyed by Reuters.
Although the number represents a remarkable improvement from the previous quarter, it is much lower than earlier expectations.
Operating profit came in at 2.07 trillion won, up 12% from a year ago and a forecast of 1.76 trillion won, while sales rose 10% to 16.68 trillion won from a year earlier.
First Half Plan
After a painful first half marked by oversupply and steep price declines, makers of dynamic random access memory (DRAM) chips had hoped for a rebound in the third quarter. Prices did bounce back briefly in the summer, but tumbled again in September. Samsung said margins in its semiconductor division rose to 18% in the third quarter, up from 8 percent in the second quarter but down sharply from 26% a year ago.
Samsung's DRAM rivals, including Hynix Semiconductor and Taiwan's Powerchip Semiconductor are also poised to report mediocre third-quarter results.
However, thanks to surging consumer appetite for flat screens and cost controls, Samsung posted an operating profit margin of 17% in its display division, almost double the 9 percent in the second quarter.
The 2008 Beijing Olympics is expected to give another boost to the liquid crystal display (LCD) industry.
Samsung is also the world's second-largest maker of mobile phones in the second quarter after Finland's Nokia and ahead of Motorola of the United States.
It sold a record 42.6 million mobile phones in the third quarter, compared with 37.4 million in the second, as it strengthened its product line in the medium and high-end markets.
Margins in the telecommunications division rose to 12% from 8% in the second quarter and 11% a year earlier.
Reflecting the poor performance in its bread-and-butter chip division, Samsung shares rose a mere 1.6% in the third quarter, lagging the broader market's 11.6% rise.