Samsung Electronics’ 1Q earnings meet expectations but where is the growth engine?

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Samsung Electronics’ 1Q earnings meet expectations but where is the growth engine?

디지털데일리 발행일 2014-04-09 15:13:51

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By Han Joo-yeob

powerusr@ddaily.co.kr

Samsung Electronics has announced its performance during the first quarter of this year, which largely meets market expectations.

The company said in a preliminary performance report on April 8 that it expects sales of 53 trillion won and operating income of about 8.4 trillion won for the January-March quarter. The sales amount is a 10.59 percent decrease from the past quarter, while the operating profit is a 1.08 percent increase. Compared with the same period last year, sales grew 0.25 percent but operating profit fell 4.33 percent.

Yeoido Stock Street had expected sales of 54 trillion won and operating income of 8.4 trillion won for the first quarter. While the sales estimate fell short of expectations a little, the operating income was beyond expectations.

Sources in the stock street said Samsung Electronics’ display panel (Samsung Display) business faced difficulty during the first quarter because of the continuing inventory adjustment. The Consumer Electronics (CE) Division also failed to improve sales due to a seasonal factor. But the company did not betray market expectations largely indebted to the recovery of earnings in the IT mobile (IM) sector following an increase in smartphone sales and the expansion of premium lines, as well as an improvement in earnings in the semiconductor sector.

But concerns about stagnation in growth still remain. During the October-December quarter of 2013, Samsung Electronics stopped updating the record growth that had been witnessed every quarter for some time because of a slowdown in earnings from smartphone sales. While some people regard Samsung’s performance as satisfactory but considering the 0.8 trillion won that was given as ‘New Management Special Bonus’ to employees during the fourth quarter of last year, which was a one-time cost, the net profit from business activities seems to have fallen over the previous quarter. There was a seasonal factor that the first quarter was an off season. But Samsung’s operating profit during the first quarter of this year is still short of the income during the same period last year, which makes it hard for the company to dispel worries about stagnation.

This is the reason why Samsung Electronics is making its utmost to make the Galaxy S5 a success and expand low-end smartphone lineups. The market is paying a keen attention to its performance during the second quarter as it would reflect the sales of Galaxy S5 phones. Would it be able to prove its growth potentials or would it stop there?