Samsung grows sales but sees weakness ahead

Net income grows 17 percent in the third quarter on a 12 percent gain in revenue, but company predicts a sluggish fourth quarter due to lower semiconductor prices and a rise in the value of the Korean won.

Lance Whitney Contributing Writer
Lance Whitney is a freelance technology writer and trainer and a former IT professional. He's written for Time, CNET, PCMag, and several other publications. He's the author of two tech books--one on Windows and another on LinkedIn.
Lance Whitney
2 min read

Samsung Electronics's third-quarter earnings and sales both grew, but the company is anticipating weaker results for the fourth quarter.

Samsung Galaxy S
Galaxy S sales helped buoy Samsung's third-quarter results. Samsung

For the quarter ended September 30, the Korean electronics firm took in a profit of 4.46 trillion won ($3.97 billion), a gain of 17 percent from the 3.81 trillion won earned in the year-ago quarter. Revenue grew by 12 percent to reach 40.23 trillion won, topping the previous quarterly sales record of 39.25 trillion won from 2009's fourth quarter.

The company attributed its solid results to a strong showing from its semiconductor unit, which snagged operating profits of 3.42 trillion won on record sales of 10.66 trillion won. But Samsung's mobile phone business also played a strong part. Led by higher sales of its Galaxy S and other flagship smartphones, the unit took in operating profits of 1.13 trillion won on revenue of 11.12 trillion won. For the quarter, Samsung sold 71.4 million handsets, a 19 percent gain over last year's third quarter.

The healthy performance from those two segments was countered by weaker results from the LCD business, where profit margins fell due to lower demand for LCD panels, especially in the U.S. and Europe. A decline in average selling prices of notebooks, computer monitors, and TV panels also impacted results in this area. The one bright spot was an increase in demand for LED TV panels across developed markets.

Samsung's digital media business, which covers TVs, cameras, and other electronic devices along with home appliances, was hit by an operating loss of 230 billion won due to lower profits from TV sales and a loss in the digital appliance area.

"In the third quarter, Samsung faced a challenging business environment including declining demand for PCs and TVs, along with a continued economic slowdown in developed markets such as U.S. and Europe," Robert Yi, vice president and head of Samsung Electronics' Investor Relations Team, said in a statement. "Despite this, we achieved strong revenue growth and profitability, which was built upon our cost competitiveness in memory semiconductors and increased sales of cutting-edge products such as our latest smartphones."

But the third quarter's strong performance isn't expected to continue. Though year-end demand for TVs and mobile phones should help sales, Samsung cautions that fourth-quarter earnings will be hurt by an oversupply and lower pricing of semiconductors along with the recent rise in the value of the Korean won. Demand for LCD panels is also expected to continue to drop, taking prices along and putting further pressure on profit margins from this segment.

To counteract some of the weakness, Samsung will try to boost its market share and hang onto double-digit operating earnings in its smartphone business by offering customers a variety of mass market smartphones, full touchscreen phones, and its new Galaxy Tab tablet. The company also plans to focus on more profitable products, such as LED TVs and 3D TV panels.