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Korean IT Giants Shine in 1st Qtr. Earnings Reports

Posted April. 25, 2009 05:23,   


Leading global IT companies had mixed performances in this year’s first quarter amid the economic crisis. The competitive structure of the market is also undergoing a rapid reshuffle under which only the best companies with solid fundamentals can survive.

Samsung Electronics yesterday said its first-quarter earnings swung into the black just a quarter after it posted nearly one trillion won (750 million U.S. dollars) in losses in last year’s fourth quarter.

○ Sorting the good from the bad

Samsung recorded 150 billion won (112 million dollars) in operating profit from 18.6 trillion won (13.8 billion dollars) in sales in the first quarter.

Its digital solution (parts) and digital communication (assembled products) sectors posted contrasting records, with digital solution suffering 950 billion won (707.9 million dollars) in operating losses and digital communication earning 1.1 trillion won (819.7 million dollars) in operating profits.

The biggest contributor to Samsung’s “earning surprise” was mobile handsets. The business posted 940 billion won (700.45 million dollars) in operating profit, or six times that in last year’s fourth quarter. The company sold more than 46 million mobile handsets in the first quarter, accounting for more than 18 percent of the global market.

Analysts say mobile handsets saved Samsung. Finnish giant Nokia controlled more than 40 percent of the global market in June last year, but its sales fell below 100 million units in the first quarter for the first time in two years.

Nokia’s market share thus fell to 37 percent, and the gap in sales volume versus Samsung was cut to 19 percentage points.

Chances are high that LG Electronics will win the intense trilateral competition with Motorola and Sony-Ericsson for third place. LG showed a solid performance by selling 22.6 million units in the first quarter. This was more than double that of Sony-Ericsson, whose sales of 14.5 million units was down nearly 10 million from the previous quarter.

Motorola will also likely see its performance deteriorate, and this has most industry insiders saying the top three in the market -- Nokia, Samsung and LG – will consolidate the market’s structure.

In the PC sector, HP rose from second last year to the top spot in the first quarter by selling 4.22 million units, or 27.7 percent of the global market. Dell was relegated to second with 26.2 percent.

HP saw its market share rise nearly three percentage points year-on-year, while Dell saw its share plunge five percentage points.

○ Survival of the fittest

Sixty percent of Samsung’s operating losses of 937 billion won (698 million dollars) in last year’s fourth quarter came from semiconductors. The chip business caused losses worth 560 billion won (417 million dollars) for Samsung.

Chip operations suffered 650 billion won (484 million dollars) in operating losses in the first quarter.

Sales of DRAM chips, however, rose three percent quarter-on-quarter despite fears over plunging prices. Samsung said, “Our semiconductor division’s operating profit ratio is minus 17 percent, but this figure is much better than those of our rivals,” adding, “We’ll further widen the gap in market share.”

Hynix Semiconductor, which also announced its first-quarter earnings yesterday, reported 652 billion won (485.8 million dollars) in operating losses on 1.2 trillion won (893 million dollars) in sales. The company, however, reduced its operating losses 38 percent from the previous quarter.

Elpida Memory of Japan, the world’s No. 3 DRAM maker, is still struggling as operating losses nearly equaled sales in the first quarter again after the previous quarter. No. 5 Qimonda has begun the process of bankruptcy protection, while certain Taiwanese chipmakers such as Powerchip Semiconductor and Promos are barely surviving on the lifeline of subsidies.

Experts say that since excess chip demand appears poised to ease after lasting more than two years, Samsung and Hynix are highly likely to post quarterly profits in the second half.

Winners and losers have stood out in the non-memory chip industry as well. Intel, the world’s largest maker of memory and non-memory chips, had operating profit of 647 million dollars in the first quarter. The figure is down 55 percent year-on-year but proved wrong Intel’s prediction that it could post a deficit.

AMD, Intel’s rival in PC processors, was hit with 414 million dollars in net losses in the first quarter, as sales slumped 21 percent.

Back in Korea, KT enjoyed improved performance in the first quarter, with operating profit gaining 15.4 percent year-on-year and jumping 361.6 percent from the previous quarter. KTF also saw operating profit soar 167.9 percent year-on-year.