(3rd LD) Samsung Electronics swings to black in Q4, brisk outlook on chips

(ATTN: ADDS analyst's comment in para 12; UPDATES with closing share price in last
para)
By Lee Youkyung
SEOUL, Jan. 29 (Yonhap) -- Samsung Electronics Co., the world's largest maker of
computer memory chips and flat screens, said Friday that its fourth-quarter
profit swung back to into the black from a year ago on surging profits from
memory chips and panels.

Samsung also painted a brisk outlook for the year ahead, citing high demand for
computers and televisions. But a potential slowdown in the economic recovery and
the strength of the local currency are concerns, with uncertainties lingering
over a supply glut in display panels in the second half of this year, it added.
Operating profit reached 3.7 trillion won (US$3.19 billion) in the three months
to December, compared with an operating loss of 740 billion won a year earlier,
Samsung said in a regulatory filing.
The operating profit came in line with the preliminary guidance that Samsung
provided earlier in January.
Sales rose 19 percent on-year to a quarterly record of 39.24 trillion won over
the cited period. The figures are consolidated, meaning they include financial
results from Samsung's overseas units.
Revenues and profits from its memory chip division jumped on a rise in both
demand and average selling prices, Samsung said. The company's memory chip
division, which produces dynamic random access memory (DRAM) chips and NAND flash
used to store music and pictures, accounted for about a half of Samsung's
fourth-quarter operating profits.
Samsung's semiconductor business generated an operating profit of 1.7 trillion
won, compared with a loss of 690 billion won a year ago. Samsung's semiconductor
unit emerged from two straight quarterly losses in the second quarter of 2009,
becoming the first in the industry to make a turnaround as its rivals cut back on
production and capital spending, battered by the global economic crisis.
"In 2010, PC shipments are expected to grow in the mid-10 percent, compared to
2009. Corporate PC replacement demand will drive growth as we enter the second
half of the year," Cho Nam-seong, head of the memory marketing team told a
conference call.
Chip supply is forecast to lag behind the demand rise, as second-tier chipmakers
struggle to recover sluggish production arising from a cutback in capital
spending that swept the industry during the downturn.
"Supply and demand balance is likely to remain tight," Cho said on the 2010
outlook for memory chips.
Analysts echoed this view that memory chips will remain Samsung's biggest seller
this year.
"They seem to have become far more bullish on the memory side, especially on the
DRAM," said Peter Yu, an analyst at BNP Paribas SA based in Seoul. "It is going
to be the year of memory (chips)."
During the conference call, Samsung said it is "seriously reviewing" increasing
memory production capability and is willing to allocate more capital on its
memory business, in addition to previously announced 5.5 trillion won.
Samsung, also the world's largest maker of liquid crystal display (LCD) panels,
reported an operating profit of 530 billion won from its panel business, a
turnaround from an operating loss of 240 billion won a year ago.
While a slowdown in panel price declines boosted sales and the demand prospects
for the year remain strong, Samsung remained cautious about its LCD business in
the second half.
"We have to be very careful about the supply-demand condition in Q3 and Q4," said
Cho Young-duk, vice president of the LCD strategy team in the conference call,
hinting that panel oversupply could kick in from July.
In the mobile handset business, in which Samsung claims the No. 2 spot after
Nokia Corp., Samsung sharply increased its operating profit to 990 billion won,
from 140 billion won a year ago.
Samsung, along with local rival LG Electronics Inc. that reported
worse-than-expected profitability in its handset business, remains under pressure
regarding its competitiveness in smartphones, the only segment on the rise, while
the overall handset market shrank last year. Samsung said it aims to increase its
global market share in handsets while maintaining an above 10 percent profit
margin.
Samsung's digital media division, which produces TVs, logged an operating profit
of 470 billion won and is expected to ride on strong demand from China and new
market segments such as three-dimensional TVs, which will "grow explosively."
Samsung said it expects to report strong earnings in the current quarter, as
higher memory chip prices and a decrease in marketing spending would offset
seasonally low demand for other consumer electronics.
For the whole year ahead, Samsung said a slowdown in the global economic recovery
due to a possible exit strategy and the Korean currency's ascent against the U.S.
dollar remain key concerns.
"Overall demand is expected to steadily increase in line with recovery," said
Robert Yi, a head of investor relation.
Investor response to Samsung's earnings was muted. Shares of Samsung Electronics
closed at 784,000 won on the Seoul bourse, down 2.97 percent from Thursday's
close. A significant forecast cut from the largest cellphone chipmaker Qualcomm
Inc. prompted sell-offs of technology shares, analysts said.
ylee@yna.co.kr
(END)

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