Samsung reports record sales performance of $7.3 billion in third quarter

After a massive legal loss to rival Apple, Samsung is rebounding by reporting a whooping $7.3 billion quarterly profit, a new record for the company which only tallied nearly half the amount in profit during the same period last year. This despite the reduced orders for its LCD screens and chips from its primary customer, Apple Inc.

Many analysts are looking for the same performance until December of this year as Samsung, the world’s leading producer of TVs, memory chips, and smartphones, rallies its resources to check the success of Apple’s new iPhone 5 and tablets in a lucrative $200 billion smartphone market throughout the world.

According to Credit Suisse, Samsung may have spent around $2.7 billion on marketing alone between July and September as it promotes London Olympics as well as its new Galaxy-line products.

The expected $25 billion record profit will be shared by Samsung’s 206,000 employees next year in forms of higher performance payouts. It may also need to set aside some money if it fails to overturn a previous ruling that awarded its rival more than $1 billion in damages.

Analyst Lee Sun-tae of NH Investment and Securities believes that Samsung’ s fourth quarter earnings will most likely be spent on performance payouts and for some legal fees related to the Apple infringement case.

“Fourth-quarter profit will be pressured by one-off expenses: performance payouts and some $1 billion in legal provisioning relating to the Apple litigation. Excluding those, core earnings will remain solid and a swing factor is how much Samsung spends on marketing.”

The first and second quarters for the following year will not be good for Samsung as analysts expect weak computer sales and weak global economy due to lower demands for electronics and chips.

However, Samsung must tread the smartphone market carefully because it is the company’s main source of earnings.

“The biggest risk for Samsung is competitive product line-ups from its rivals such as the iPhone 5. Because handsets drive most of its profits, one misstep in handsets could result in losses for the whole Samsung group,” remarked Byun Han-joon, a KB Investment & Securities analyst.

Samsung’s mobile division more than doubled its earnings during July to September as it sold over 20 million Galaxy IIIs around the world.

Such strong handset sales performance offset the poor showing of its chips division, which saw a 14 percent drop in sales during the September quarter. Samsung is expected to allocate less resources in making chips next year as the overall worldwide demand weakens.

Samsung’s new Galaxy Note II is also expected to perform well as Samsung’s mobile division head predicts a 10-million-sale performance at the end of December.

Despite the landmark loss it suffered from Apple, Samsung’s brand continue to surge in the United States as it produced more smartphones and handsets than any of its rivals. According to Interbrand, a brand consultancy company, Samsung brand has jumped from its 17th place last year to the 9th spot. Its main rival, Apple is ranked at the second spot.

source: reuters

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