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Strong sales of its Galaxy smartphone helped Samsung Electronics post a record operating profit in the second quarter, stretching the South Korean company’s lead over rival Apple in the highly competitive market.
Samsung estimated its operating profit for the April-June period was Won6.7tn ($5.9bn), up nearly 80 per cent from the same quarter a year earlier. It projected sales of Won47tn, compared with Won39.4tn in the previous year.
The company did not give net income or earnings for separate divisions. It will announce full second-quarter results toward the end of July.
Samsung, the world’s largest smartphone maker by sales, has benefited from strong demand for its new Galaxy S III model ahead of the anticipated introduction of Apple’s next iPhone later this year. It has said it expected its latest handset to sell more than 10m units by July, making it the company’s most successful product so far.
Analysts estimate operating profit at Samsung’s telecoms business more than doubled to about Won4.42tn from Won1.67tn in the quarter, accounting for more than 70 per cent of the company’s total earnings.
According to CLSA Asia-Pacific Markets, the company probably shipped 50m smartphones in the second quarter. Analysts said the momentum was likely to continue through the current quarter in the absence of a strong rival in the high-end smartphone market.
A running legal dispute with Apple over patents has so far not hurt Samsung’s sales. After Apple won a court order in June blocking sales in the US of Samsung’s Galaxy Tab 10.1 tablet, all eyes are on the main proceedings of the US court hearing, slated to begin on July 30.
Despite Friday’s upbeat guidance, Samsung’s shares fell 2 per cent. Its stock has dropped about 15 per cent in the past two months as the company faces a challenging business environment with the global economy slowing and Europe in the grip of a prolonged debt crisis.
In contrast with the upbeat performance of its telecoms division in the quarter, other businesses such as memory chips and televisions were hit by slowing demand and lower prices. Operating profit at the chip division is estimated to have fallen nearly 30 per cent to Won1.3tn, as demand for personal computers wanes.
To cope with the industry slowdown, Samsung has been diversifying away from PC D-Ram into more specialised chips used in mobile devices and servers. Analysts said the pace of growth in D-Ram output may slow in the third quarter, after Micron Technology this week agreed to buy Japan’s Elpida Memory to double its market share.
Samsung plans to spend Won15tn on the semiconductor business this year. Although the company faces a potential earnings challenge in the fourth quarter after Apple launches the iPhone 5, probably in the autumn, analysts said a recovery in the chip business may help offset that because the next iPhone will boost Samsung’s chip sales. Samsung is the sole provider of processing chips used to power the iPhone and iPad.