South Korean Electronics giant Samsung guided toward record earnings in the fourth quarter of 2012 at the Consumer Electronics Show (CES) in Las Vegas Jan. 8. The company said sales increased to $53 billion and operating income to $8.3 billion.
Samsung will officially release audited financial figures for the fourth quarter of 2012 on Jan. 25, but the company preannounced the unaudited figures for sales and operating income at CES. Sales were up 18 percent from the fourth quarter of 2011 and operating profit rose 65 percent, making for another record quarter.
Samsung did not release specific figures for its divisions, but analysts estimate that its mobile segment had a strong performance. “For telecoms, we estimate the company has shipped 62 million smartphones during the quarter and 7.5 million tablet PCs,” writes Barclays.
Samsung is the world leader in smartphone sales (up 72 percent from 2011) and produces the popular Galaxy S series. In the tablet space, the Galaxy note is still lagging behing Apple’s iPad, but also growth here was stellar, with shipments rising 249 percent since 2011.
Samsung benefited from a massive marketing campaign poking fun at Apple devotees waiting in line for the release of the latest iPhone, while portraying the Samsung Galaxy S as hip and cool. This campaign weighed on margins in the telecom division, an effect soon to reverse according to an analysis by Citigroup.
“We expect the smartphone profit will remain stable in [the first quarter of 2013], thanks to a seasonally low marketing spending burden … amid slow iPhone 5 momentum. With the launch of Galaxy S4 late [in the first quarter or early in the second quarter], we expect Samsung will expand dominance in the high-end segment until we see more meaningful upgrade of Apple iPhone line-ups.”
Apple Lawsuit and Currency Headwind
Samsung, however, also benefitted from not recognizing loss reserves related to the patent lawsuit it lost with Apple. Once these reserves are recognized, operating income will likely go down.
“We believe the company did not recognize the provision related to its lawsuit with Apple due to the delay of the final decision by the judge in the U.S., which might be part of the reason for the stronger-than-expected result in [Q4], despite the headwinds from currency,” write Barclays analysts.
They also mention another problem for Samsung, which is the rising South Korean won currency. During the last six months, the won rose 7.3 percent against the dollar and 17.9 percent against the Japanese yen. If the won keeps on rising, Samsung’s products will be more expensive for Japanese and U.S. buyers who might opt for cheaper alternatives.
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