Samsung - Samsung Elec Q3 profit slumps, rebound seen

Samsung Elec Q3 profit slumps, rebound seen
By Kim Yeon-hee and Rhee So-eui
SEOUL, Oct 14 (Reuters) - Samsung Electronics Co. Ltd. (005930.KS: Quote, Profile, Research) reported a 30 percent drop in quarterly profits on Friday on lower memory chip prices, but forecast a recovery on brisk demand for sleek flat screens and pricier mobile phones.
The world's top flat screen and memory chip maker forecast a supply shortage of liquid crystal displays (LCDs) to persist in the current quarter and demand for its computer memory chips to get a boost from strong PC sales and lower chip prices.
"Samsung's LCD and chip business will recover steadily thanks to growth in the global IT sector next year, though the pace will be slow," said Chang In-whan, chief executive at KTB Asset Management. "Lower prices of panels and chips will boost demand, especially for digital TVs."
Shares in Samsung shed early gains and ended flat as some investors appeared wary of its earnings growth potential.
Buoyant demand for flash memory chips, used in hot-selling digital cameras and music players, has boosted its earnings outlook for 2006, offsetting continuing price pressure on dynamic random access memory (DRAM) chips.
Samsung hopes the launch of new high-end models in coming months will improve profit margins for its cell phone division in the first quarter of 2006.
But the firm turned more cautious about the price outlook for computer memory chips, seeing a fall of less than 5 percent in the current quarter from the third, when prices fell 3 percent.
Average contract prices of the mainstay 256-megabit DDR (double data rate) DRAM chips tumbled 40 percent by the end of September from a year ago, analysts said.
Samsung earned 1.88 trillion won ($1.80 billion) in net profit for the third quarter, in line with analysts' forecasts.
Third-quarter earnings reflected provisions set aside to cover costs related to U.S. antitrust body's investigation into the price-fixing of memory chips, the company said in a statement. It has agreed to plead guilty to the charge and pay a $300 million fine, U.S. antitrust authorities said on Thursday.
The earnings were down from 2.69 trillion won a year ago, but up 11 percent from the previous quarter's 1.69 trillion. Sales were 14.54 trillion won versus 14.34 trillion a year ago.

SOLID HANDSET SALES
"We expect better results in both top and bottom lines in the fourth quarter," senior vice president Chu Woosik said in a conference call with analysts, citing strong seasonal demand at year end for new electronics goods.
Shares in Samsung, the world's most valuable technology firm outside of the United States with a market capitalisation of $80 billion, closed unchanged at 562,000 won. The wider market fell 0.27 percent.
Samsung, the world's number three mobile phone maker, sold record 26.8 million handsets in the third quarter and expected to sell a similar number in the current quarter, versus 24.4 million in the second quarter.
The technology firm competes with bigger rivals Nokia (NOK1V.HE: Quote, Profile, Research) and Motorola Inc. (MOT.N: Quote, Profile, Research) , which are piling pressure on Samsung with the introduction of cheap low-end models.
The margin on Samsung's cell phone division stood at 12 percent in the third quarter, unchanged from the second.
Samsung raised its forecast for global mobile sales this year to 760 million phones from the previous 720 million, expecting to beat its 2005 sales target of over 100 million units.

FLASH MEMORY
In the memory chip sector where it competes with Intel Corp. (INTC.O: Quote, Profile, Research) , Samsung expects PC demand to grow 12 percent in the fourth quarter, driving up DRAM chip sales used mainly in PCs. That compares with a 10 percent rise in the third quarter and 4 percent fall in the second quarter.
Intel, the world's biggest microchip maker, announces quarterly results next week.
Samsung expects flash chip prices to fall 19-20 percent in the fourth quarter from the preceding quarter, a similar drop to the third quarter, a company executive told analysts.
Samsung, which is battling Japanese rival Toshiba Corp. (6502.T: Quote, Profile, Research) in the NAND flash memory chip market, is holding down chip prices to woo more electronics makers to use its erasable and rewriteable memory chips with lower costs.
The firm started selling its flash chips to Apple Computer (AAPL.O: Quote, Profile, Research) for its popular iPod Shuffle and other music players in the second half of this year. The Samsung executive forecast flash chip demand would continue to grow until the end of 2008.
Full-year net profit at Samsung is forecast at 7.27 trillion won in 2005 and 9.43 trillion won next year, down from a record 10.79 trillion won in 2004, according to Reuters Estimates.
For the LCD division, Samsung expects strong demand for bigger flat-screen TVs and notebooks until the first half of next year, although an oversupply is seen for PC monitors during the last three months of 2005.
LG.Philips LCD (034220.KS: Quote, Profile, Research) , the world's second-biggest flat screen maker, said on Tuesday its third-quarter profit dropped 22 percent from last year as panel prices remained well below their 2004 peak, though its earnings jumped five-fold from the June quarter on stronger demand for flat-screen TVs.
Striking a more pessimistic note than Samsung, the firm saw LCD screen prices staying weak until the end of the year, pushing shares of LCD makers lower.
Samsung shares fell 6.2 percent over the past two days after LG.Philips's earnings. The stock rose 17 percent in the third quarter, while the wider market gained about a fifth.