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Samsung Electronics Profit Falls Less Than Expected

Samsung Electronics, the world's top maker of memory chips, reported on Tuesday a smaller-than-expected 7 percent fall in quarterly profit as strong results from flat screens offset a dismal showing by chips.

Samsung
Samsung

The weak short-term outlook for the South Korean company's chip business is set to linger in the first half of this year as a global oversupply of computer chips coincides with a weak season for sales.

Samsung, also the world's top maker of large liquid crystal displays LCD screens and TV sets, posted a net profit of 2.21 trillion won (US$2.36 billion) in the fourth quarter to Dec. 31, beating a 1.98 trillion won forecast from analysts polled by Reuters.

The technology powerhouse earned a 2.37 trillion won net profit a year earlier and 2.19 trillion won in the third quarter.

Operating margin in Samsung's once-flourishing semiconductor unit fell to a mere 9 percent in the quarter, down from 18 percent in the third quarter and 31 percent in the year-ago period.

Makers of dynamic random access memory (DRAM), used in personal computers, are betting that spending cutbacks from cash-starved manufacturers and improving demand will eventually salvage the sector this year. But the recovery, when it happens, is likely to be a bumpy one.

An expected oversupply is also darkening the outlook for NAND flash memory, used in gadgets such as digital cameras and music players.

On the bright side, Samsung's LCD unit had another strong quarter, with margins rising to 21 percent after the third quarter's 17 percent and 10 percent in the year-ago period.

LCD makers look set to enjoy a strong year following industry-wide investment cuts in 2007. On Monday, smaller rival LG.Philips LCD reported its highest-ever quarterly profit on solid demand and tight supplies.

Samsung, which trails Nokia but overtook Motorola in the handset market in 2007, sold a record 46.3 million phones in the fourth quarter. Margins in the unit fell to 11 percent from the third quarter's 12 percent.

Samsung's operating profit was 1.78 trillion won, compared with an average forecast of 1.61 trillion won. Sales came in at 17.48 trillion won, up from a 16.94 trillion won forecast.

In 2008, Samsung is expected to earn 8.3 trillion won, up from a 7.43 trillion won net profit last year, according to Reuters Estimates.

Samsung shares, valued at $79 billion, rose as much as 2.48 percent in the Asian session Tuesday. The stock slipped 3.3 percent in October-December, while the KOSPI dipped 2.5 percent.