Samsung reports bumper third quarter profits but warns of slump ahead

The South Korean conglomerate reported operating profit rose nearly 60% to 12.35 trillion won ($10.9 billion) for the July-September quarter compared to the same period last year. Analysts polled by data provider Refinitiv had predicted 11.1 trillion won ($9.8 billion) in operating profit.

Samsung said sales for the third quarter rose about 6% to 67 trillion won ($59 billion). Analysts polled by Refinitiv had predicted 64.7 trillion won in sales ($57 billion).

But looking ahead, the company said it expects profit to decline in the fourth quarter, driven by weakening demand from server customers for memory chips. It added that it also expects smartphone sales to decline and marketing costs to increase because of the competitive market environment. Rival smartphone maker Apple (AAPL) launched its highly anticipated iPhone 12, its first 5G enabled device, this month.
Shares in Samsung were last trading down 2.2% in Seoul, outpacing declines in South Korea’s Kospi (KOSPI).

The earnings report comes shortly after the death of Lee Kun-hee — the business titan who led Samsung’s rise from a modest South Korean company to a multinational conglomerate. Lee died on Sunday at the age of 78.

Samsung chairman Lee Kun-hee dies after long illness

Lee’s son, Lee Jae-yong, has been the company’s de facto leader since his father’s heart attack in 2014. Asked earlier this week about whether the vice chairman would take his father’s title as chairman, Samsung declined to comment.

“While we assume JY Lee … will take the chairman’s role, we don’t expect a meaningful change in group ownership structure, management and business operation for Samsung in the short term given uncertainties from [an] ongoing trial issue and potential new regulation from the [South Korean] government,” analysts at brokerage firm Daiwa wrote in a note on Tuesday.

The younger Lee was found guilty of bribery and other corruption charges in 2017 and served less than a year behind bars before an appeals court threw out some of the charges and suspended his sentence. Last month, the vice chairman was indicted over a controversial 2015 merger that helped him tighten control over the company.

Despite the legal troubles, Daiwa analysts said they “expect JY Lee and top management to actively look for [merger and acquisition] opportunities to secure the company’s long-term earnings growth momentum” and enhance the company’s value beyond the era of chairman Lee.

Samsung is one of the world’s top chipmaking companies. But the semiconductor industry has been rapidly consolidating, driven by the high research and development and capital expenses required to stay at the cutting edge of chipmaking.
Samsung rival SK Hynix announced this month that it’s buying part of Intel’s memory chip making business for $9 billion. And AMD on Tuesday agreed to buy rival chipmaker Xilinx in a $35 billion deal.

— Jake Kwon and Yoonjung Seo contributed to this report.

Source link

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Most Popular

To Top