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Samsung Q4 Profit Rises 17% On Strong Smartphone Sales

South Korean conglomerate Samsung Electronics Co. Ltd. (SSNLF.PK, SSNNF.PK, SMSN.L) reported late Thursday a 17 percent year-over-year increase in profit for the fourth quarter, boosted by strong sales of its Galaxy smartphones, more than offsetting weakness in flat panels and computer chips. The company's smartphone business is said to have surpassed major rivals in shipments.

The Suwon, South Korea-based company reported a net profit of 4.0 trillion won or $3.57 billion for the quarter, up 17 percent from 3.42 trillion won in the prior-year quarter, and 16 percent higher than 3.44 trillion won in the preceding third quarter.

Total sales for the quarter increased 13 percent to 47.30 trillion won from last year's 41.87 trillion won, and also was up 15 percent from 41.27 trillion won in the prior quarter.

Total operating profit grew 13 percent to 5.30 trillion won from last year, with operating margin expanding 400 basis points to 11.2 percent from a year ago.

Earlier in the month, Samsung had estimated fourth-quarter sales of 47 trillion won, with an operating profit of 5.20 trillion won.

Samsung is the world's largest manufacturer of liquid crystal displays as well as flat-screen televisions and is currently ranked second only to Nokia Corp. (NOK) in the production of mobile phones. Meanwhile, it pipped US technology giant Apple, Inc. (AAPL) and Nokia in the third quarter to become the world's largest vendor of smartphones by shipment volume, but trailed Apple in the fourth quarter.

Amid a global patent war, Samsung is currently locked in patent infringement battles with Apple at courts in several countries in the European Union, the U.S. and Asia, involving smartphone and tablet patents since April. However, these have not affected their shipments.

Quarterly sales at Samsung's telecommunication division surged 52 percent to 17.82 trillion won, with mobiles sales up 54 percent. Handset shipment growth was substantially led by enhanced market leadership in high-end smartphones, also boosting segment profit.

Meanwhile, sales at the semiconductor division, normally the main source of income, edged down 1 percent to 9.17 trillion won, with memory sales dropping 10 percent as stronger demand for NAND products used in smartphones and tablet PCs was more than offset by weak memory demand.

Display panel division's sales grew 19 percent to 8.55 trillion won, with LCD panel sales growing 8 percent, and TV panel shipment shipments increasing about 20 percent. Shipment and sales growth continued due to the demand increase from smartphones. Samsung is now focused on expanding sales of LED panels through value-added/differentiated product line-up.

Digital media and appliances division sales increased 4 percent, with visual devices sales rising 6 percent.

For fiscal 2011, the company reported a net profit of 13.73 trillion won, down 15 percent from 16.15 trillion won in the prior year. Total sales for the full year increased 7 percent to 165.0 trillion won from last year's 154.53 trillion won.

Looking ahead, Samsung is expected to continue reporting strong earnings in 2012, with smartphone shipments likely to remain firm, and a rebound anticipated in dynamic random access memory or DRAM prices, which had slumped last year. The drop in DRAM chip prices had squeezed the company's earnings. Meanwhile, the traditionally slower selling season could see the company's profit drop in the first quarter.

The company's parent Samsung Group said earlier in the month that it plans to spend 47.8 trillion won or $41.7 billion on investments in 2012. The figure represents a 12 percent increase from the company's investment of 42.8 trillion won in the prior year, despite the global economic uncertainty. Meanwhile, Samsung's rival LG Group announced that it will cut its 2012 investment and hire fewer workers.

Samsung shares are currently trading down 2,000 won or 0.18 percent in Friday's regular trading at 1,111,000 won on the Kospi on a volume of 78,412 shares.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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