Samsung net profits increase 76 percent on Galaxy smartphone sales
Samsung said late yesterday that its fourth quarter new profit grew 76 percent to another record high on strong sales of its Galaxy Tab smartphones and newly introduced tablets.
The South Korean company reported a profit of US $6.6 billion. It was the 5th consecutive record quarterly profit for Samsung, which reported a 19 percent increase from comparative numbers posted in 2012.
About 47.9 percent of that revenue came from its mobile communications division, particularly strong sales of its Galaxy S3 smartphone and Galaxy Note 2 ‘phablet’.
The results were slightly improved from the previous earnings guidance issued by the company 10 days ago. Samsung announced early this month that it had sold more than 100 million smartphones in the Galaxy series since its launch in May 2010, calling it the driving force behind the electronics maker’s rise to the top in the global smartphone market.
“Despite uncertainties in Europe and concerns over the U.S. fiscal cliff creating a difficult business environment, we did our best this quarter to achieve stronger earnings based on a strategic focus on differentiated and high value-added products as well as our technological competitiveness,” said company spokesperson Robert Yi.
While its sales of LED TVs also helped boost earnings, Samsung said that overall demand for home appliances declined due to what the company called the “tepid global economy.”
Samsung said that demand was weak for PC DRAMs during the quarter, while the semiconductor unit posted $8.97 billion in sales, a ten percent increase quarter over quarter.
Samsung’s memory chip business contributed $1.3 billion in operating profits, a 39 percent quarterly increase. But the company also warned that overall demand for memory chips in the first quarter would be tempered by seasonably poor sales of PCs and mobile devices.
“Heading into this year, we are expecting a slower recovery in the component business due to reduced capital expenditures, while competition in the set business will intensify further as demand slows and the mid to lower-end market,” Yi added.
In other mobile news
After the markets closed yesterday, Apple reported a very strong quarter, boosted by strong iPhone and iPad sales. However, the popularity of lower-cost versions of its mobile devices dented the company’s profits somewhat. Nevertheless, it was still a record quarter for Apple.
The company sold no less than 47.8 million of its popular iPhones during the past quarter, shattering the old record of 37 million that it set a year ago when the iPhone 4S debuted in October 2011, just a few days after the death of Steve Jobs.
These are still very strong numbers, considering that supply chain woes limited the iPhone 5′s availability throughout much of the quarter.
That helped Apple record a quarterly profit of $13.1 billion, the second highest profit ever earned by a U.S. corporation, surpassed only by Exxon Mobil’s record-setting $14.8 billion quarter from the fall of 2008, when oil prices were at an all-time high.
Nevertheless, many industry analysts are concerned that buyers’ interest in the the iPhone might be drying up somewhat. Sales estimates for the current quarter and beyond are a small pittance compared to the number of iPhones Apple was able to sell over the past three months.
Apple customers also appear eager to pay $100 less to get a year-old iPhone 4S or $200 less to get the two-year-old iPhone 4 instead of the iPhone 5, whose features are only slightly better than the older versions.
For its part, Verizon reported on Tuesday that it sold a record number of iPhones during the quarter, but the iPhone 5 made up only about 47.7 percent of its Apple smartphone sales.
As a result, Apple’s profit just barely beat its total from the same quarter a year ago. By the slimmest of margins — $14 million — Apple avoided recording its first year-over-year drop in profit in nine years, as analysts had feared it could.
The older iPhones reduced the average selling price of the device and contributed to Apple’s lower profit margin. The company’s gross margin fell to 38.6 percent, down a huge six percentage points from the same period a year ago.
And Apple shareholders didn’t like the news one bit. Shares of Apple fell by more than 11.8 percent in after-hours trading late yesterday. Apple’s sales rose 17.7 percent to $54.5 billion, just missing analysts’ forecasts of $54.7 billion.
But Apple still managed to increase its cash hoard very nicely just the same– it’s currently sitting on $137.1 billion of cash.
As for the iPad, the company said it sold 22.9 million devices, also a record. The iPad mini debuted last quarter, much to the delight of consumers waiting for a lower-priced Apple tablet.
But investors aren’t quite as sold on the iPad mini. Like the older, cheaper versions of the iPhone, the eight-inch tablet cannibalized the full-sized iPad’s sales, lowering the iPad’s average selling price by $100. That dug into Apple’s profit.
On a conference call with analysts, CEO Tim Cook was unapologetic about selling less-expensive items. He said the company’s best measure of success is whether customers love Apple products. Noting that Apple sold ten iOS devices per second last quarter, Cook said Apple hit the bull’s eye right in the center.
“You’re going to hear a lot of impressive numbers on this call, but that’s not the only way we measure success,” Cook said. “We’re unwilling to cut corners to deliver the best experience in the world.”
Also on Wednesday, Apple reported 4.1 million Mac computer sales, down 21 percent from a year ago, and 12.7 million iPod sales.
Cook said that Mac sales dropped simply because Apple was unable to make the new iMacs quickly enough to meet the increased demand, and the iPad cannibalized some of its PC sales.
Apple also sold more than 2 million Apple TV set top boxes in the quarter, the first time the device eclipsed the 2 million mark. Former CEO Steve Jobs called the product a “hobby,” but Cook said Apple TV has grown beyond a niche product.
Apple is widely rumored to be working on a new television device, which some believe might debut later this year. Peter Oppenheimer, Apple’s chief financial officer, said he expects the company to produce sales of $41 billion to $43 billion during the current quarter and gross margin between 37.5 percent and 38.5 percent.
However, both of these estimates fall far short of Wall Street analysts’ forecasts. Apple’s outlook has typically been ultra-conservative– the company liked to set low bars it could easily clear, but Oppenheimer said that now Apple has changed the way it provides guidance.
It now “reflects what Apple is likely to achieve,” he told analysts, as opposed to a “conservative estimate” that Apple expects to beat.
It will be interesting to see what the next quarter has in store for Apple. Already, many investors think that Apple could miss the mark again, but the are still many that disagree completely.
In other mobile news
According to a new report released by market research firm IHS iSuppli, the overall number of LTE subscribers is set to more than double this year.
The report states that global LTE subscribers will surpass 198.1 million in 2013, a 115 percent increase from the 92.3 million reached in 2012.
And the numbers from various wireless carriers also back up those figures. For example, MetroPCS recently reported that mobile subscribers operating on the company’s LTE network increased by 117 percent from the third quarter to the fourth.
While that’s happening, Verizon Wireless said it added 2.3 million LTE-capable devices (1.6 million smartphones), up from 1.4 million LTE-capable devices in the third quarter of 2012.
iSuppli points out that LTE technology has surged by a factor of 22 to 13.2 million subscribers in 2011, and then jumping another 599 percent in 2012 to nearly 100 million subscribers.
By 2016, the reserch firm forecasts that LTE will claim more than 1 billion users, equivalent to a five-year compound annual growth rate of 139 percent.
Wayne Lam, senior analyst for wireless communications at IHS, said there are still significant challenges down the road. “Rapid adoption will drive design innovations, particularly in smartphones, but inherent and lingering problems such as wireless spectrum fragmentation will also remain a serious issue for LTE that requires immediate attention,” Lam said in a statement.
“But the LTE segment should be less worried about rifts or divisions in the technology, and more concerned with laying the foundation for sustained growth across the entire LTE landscape,” he added.
IHS iSuppli also points out that interoperability across multiple wireless carriers and spectrum holdings is far from consistent, currently registering more than 40 different frequency spectrums.
In other mobile news
NFC technology is finding a lot of newer ways to make itself work, and it’s not just for eCommerce anymore, as witnessed by many at CES 2013 last week.
Paying for various items with one’s phone now even seems to be the least common use for the close-range connectivity technology today, at least based on certain gadgets unveiled at the Consumer Electronics Show in Las Vegas.
Essentially all products using NFC shown at the show employed the technology in one of two ways– to set up a sort of digital handshake between a mobile device and another gadget, or, as a way to share information between products with just a light tap of the device.
“NFC really simplifies things a lot more than what most people think,” says Scott McGregor, CEO of connectivity chipmaker Broadcom.
“Even the most advanced and the most modern technology is totally stifled if it’s not easy to use. NFC plays a very valuable role in simplifying user interfaces for consumer products,” added McGregor.
NFC is short for near-field communication, a chip technology that allows devices to transfer small amounts of data between each other. Both devices must contain NFC chips and must be closer than an inch to connect with each other.
Typically, NFC works by tapping the two devices together to securely exchange data such as credit card information, train tickets, coupons, theatre tickets, parking fare and similar transactions.
NFC has long been hailed as the technology to bring on mobile payments on a very large scale. The concept of waving your phone device in front of a cash register to purchase goods is something that appeals to most.
But the mobile payments trend has been slow to take off, and it continues to face a few obstacles for its long term adoption. While the technological issues have largely been resolved, there just aren’t that many stores and point-of-sales terminals equipped with NFC for widespread use.
But at CES, NFC popped up in nearly everything imaginable, and not just at cash registers. Along with the usual devices, like smartphones, there were speakers, cameras, televisions, refrigerators, business cards, and numerous other items. Some companies, such as Panasonic, have even added NFC technology to rice cookers!
NFC is already becoming a familiar specification standard in most smartphones today. Aside from mobile payments, many handset vendors have been using NFC technology as a way to differentiate their products from their rivals, particularly the iPhone.