Samsung Electronics beats Q1 estimate, but holds cautious outlook

(ATTN: UPDATES share price in 5th para; ADDS more details in paras 10-11, last para)
SEOUL, April 24 (Yonhap) -- Samsung Electronics Co., the world's leading computer
memory chipmaker, reported better than expected first-quarter earnings on Friday
as its mobile handset business offset a slump in its chip and LCD divisions.

The company's net profit reached 619 billion won (US$458 million) in the
January-March period, down 72 percent from a profit of 2.19 trillion won a year
earlier, as weak demand dragged down prices amid the economic downturn, the
company said in a regulatory filing.
The first-quarter earnings, however, were much better than around 150 billion won
predicted earlier by the market.
Sales increased 8.5 percent to 18.57 trillion won over the cited period, while
operating profit dropped to 148 billion won from 2.15 trillion won, it said.
Shares of Samsung Electronics were trading at 597,000 won on the Seoul bourse as
of 1:55 p.m., down 4.78 percent.
Samsung, which had booked its first quarterly loss of 22 billion won in the
previous quarter, is expected to see its business performance improve down the
road as the battered memory chip sector shows signs of emerging from a severe
downturn, according to analysts.
"The first-quarter earnings were better than expected, and its earnings will
improve down the road as production cuts may help ease an industry glut and price
gains," said Kwak Byeong-yeol, an analyst at KB Securities.
Industry-wide output cuts have helped drive up prices of dynamic random access
memory (DRAM) chips by more than 60 percent this year, while prices of flash
memory chips have more than doubled.
"We are in talks to raise DRAM prices supplied to our customers, but the price
gains will not be big," said Lee Myung-jin, an official with Samsung Electronics'
investor relations team.
He said DRAM prices will rebound in the second quarter, but fall slightly in the
third quarter due to seasonal factors.
"The chip and LCD sectors should ease the supply glut, but it appears the sectors
are nearing their bottom," Lee said, adding that the pace of recovery will not be
as fast as expected.
Samsung, also the world's largest maker of liquid-crystal displays and the No. 2
maker of mobile phones, has been hurt by sinking demand for semiconductors,
mobile phones and other consumer electronics as the global economic recession has
sapped demand for these products.
Its semiconductor business suffered an operating loss of 670 billion won in the
first quarter, the second straight quarterly deficit, hit by falling demand and
weak prices. That compared with a profit of 193 billion won a year earlier.
Its LCD division also suffered an operating loss of 310 billion won, compared
with a profit of 1 trillion won a year earlier, as demand for TVs and computers
slumped during the recession, driving down panel prices.
But Samsung's information and telecommunication business line logged an operating
income of 1.12 trillion won, boosted by robust sales of mobile handsets, which
offset a slump in its other business divisions.
Samsung said the average selling price for its handsets rose 2 percent from the
fourth quarter of last year on increased sales of high-end products, though the
total volume of sales remained flat.
Despite better than expected results, Samsung said the second-quarter outlook
remains uncertain.
"Despite the industry downturn, our first-quarter earnings were better than
expected," Lee said. "But it is still premature to be optimistic about an upturn
in demand and the economic cycle."
Samsung said its LCD production facility will operate at full capacity in the
second quarter to meet rising demand, but remained cautious over the outlook for
the second half of the year.
Lee said that Samsung invested 600 billion won in upgrading and maintaining
production facilities. "But we don't have any concrete investment plan for the
year," he said.
sam@yna.co.kr
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