Reply #23: Samsung bullish on tech recovery [View All]

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http://www.ft.com/cms/s/0/23d3f9b4-69e3-11de-bc9f-00144feabdc0.html

By Song Jung-a in Seoul

Published: July 6 2009 05:22 | Last updated: July 6 2009 23:09

Samsung Electronics, the world’s biggest maker of memory chips and liquid crystal display screens, signalled on Monday that it might be emerging from the downturn in the technology sector as it forecast a fivefold jump in second-quarter operating profit.

Technology groups have been hard hit by the economic downturn as consumers have scaled back on purchases of electronics products.

But signs of optimism are increasing. The South Korean group’s announcement comes less than a month after Taiwan Semiconductor Manufacturing Company, the world’s biggest contract chipmaker, bet on a recovery in the chip industry as it revealed plans to boost manufacturing capacity and technological prowess.

Samsung has fared better than Sony, its Japanese rival, and has increased market share in the handset and flat-panel television markets. Its cost competitiveness has been helped by the weakness of the won against the dollar.

Samsung said it expected operating profit on a consolidated basis to range from Won2,200bn to Won2,600bn ($1.7bn-$2bn) in the April-June period, and estimated revenues at Won31,000bn-Won33,000bn.

The consolidated figures include earnings from overseas affiliates.

The company reported its first operating loss of $680m in the fourth quarter but swung back to profit in the first quarter, although net profit was still down 72 per cent from a year ago.

Samsung does not normally give a forecast ahead of its results, but decided to do so to reduce market speculation. Analysts said the surprisingly bullish announcement suggested the company was back on track. The forecast is a big jump from the first quarter’s Won470bn and is comparable to the Won2,400bn profit a year ago.

The shares rose as much as 6.32 per cent to Won639,000 on Monday, outperforming a 0.63 per cent rise in the broader market. Bank of America-Merrill Lynch raised its recommendation from “underperform” to “buy”, citing earnings growth.

Analysts attributed Samsung’s strong performance to brisk sales of its high-margin liquid crystal display TVs and multimedia mobile handsets.

“Sales of digital media products such as LCD TVs and home appliance goods were better than expected,” said James Song, analyst at Daewoo Securities. “Demand for electronics products seems to be recovering gradually.”

He said earnings would continue to improve in the third quarter, helped by a turnround in the struggling D-Ram memory chip business. Prices of the benchmark computer memory chip prices rose 8 per cent in the second quarter while global chip sales in May rose for a third consecutive month.