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Samsung Electronics Quarter Profit Slips But Outlook Is Strong

Samsung Electronics, the world's top memory chip maker, reported a smaller-than-expected 5% drop in quarterly profit on Friday after a steep fall in computer memory chip prices overshadowed improvements in flat screens.

Samsung, the most valuable technology company outside the United States, earned a net profit of 1.42 trillion won (US$1.55 billion) in the second quarter, above the 1.29 trillion won forecast from 10 analysts Reuters surveyed. The figure compares with 1.51 trillion won earned a year earlier.

Operating profit was 900 billion won, against 1.42 trillion won in the year-ago period and a forecast of 880 billion won. The figure was the lowest posted by Samsung since the fourth quarter of 2001. Sales were 14.63 trillion won, up from 14.1 trillion.

But the outlook for the second half is brighter, with the market for dynamic random access memory (DRAM) chips, used in personal computers, expected to recover on the back of seasonal demand, while the company's mobile phone and display business should improve.

Shares in Samsung, South Korea's biggest stock with a market value of about $104 billion, rose over 3% in the morning session. The stock rose just 0.5 percent in the second quarter, trailing the KOSPI's 20% rise.

Encouraged by a strong DRAM market in 2006, manufacturers kept churning out the chips at a brisk pace in 2007 despite sluggish demand, leading to an oversupply and steep price declines, estimated at more than 40% between April-June.

Samsung said margins in its mainstay semiconductor division fell to 8% from 12% in the first quarter and 22% a year ago.

Samsung, also the world's third-largest maker of mobile phones after Nokia and Motorola, sold a record 37.4 million phones in April-June after selling 34.8 million in the first quarter.

Margins in the telecommunications division were at 8%, down from 13% in the first quarter, on lower prices and higher marketing costs.

The world's biggest maker of large liquid crystal display (LCD) panels posted an operating profit margin of 9% in its display division thanks to an upturn in the market, compared with 3% a year ago.