Samsung handset performance: mixed bag

Samsung Electronics Co. Ltd. solidified its position as the world’s No. 2 handset vendor in the second quarter, with less than half the volume of Nokia Corp. but nearly twice the volume of closest rival LG Electronics Co. Ltd.
Handsets proved to be the industrial conglomerate’s second-strongest business, behind liquid crystal displays, while flat screen televisions remained a strong business and Samsung’s semiconductor business faltered.
Apparently, the company’s operating profit missed analysts’ expectations and Asian exchanges sent the parent company’s stock down about 6% on the news today.
Samsung’s total revenue reached $18 billion in the quarter just past, up 24% over the year-ago quarter. Handsets accounted for $5.4 billion, or about 30%, of total revenue.
The company’s overall operating profit reached nearly $1.9 billion, with telecommunications – largely but not entirely handsets – earning $781 million, or 42% of total profits. Handset profit represented a 114% jump over the year-ago quarter, but down 15% sequentially.
Handset numbers
Samsung shipped 45.7 million handsets in the second quarter, up 22% over the year-ago quarter, but down 1% sequentially, which the vendor blamed on macro-economic weakness and seasonality.
The company forecast it would ship an estimated 200 million handsets for the entire year, having shipped 92 million in the first half. If that forecast is realized, that would mean that Samsung shipped 27% greater volume in the first half and a 21% increase in volume for the second half of the year over comparable periods last year.
Yet Samsung projected increased demand in the second half due to seasonality – read: the beloved fourth quarter blowout – and new product launches and a ramp in 3G-enabled handsets. The company cited continued demand in emerging markets, but named India and Africa, with China conspicuously absent despite the Beijing-based Olympic push.
But Samsung highlighted “intense competition” among high-tier handsets due to the expected, multi-vendor launches of smartphone and touchscreen models due later this year – widely viewed as the incumbent vendors’ response to the disruptive challenge posed by Apple Inc.’s iPhone.
The company’s average selling prices saw a small sequential uptick (1.4%), to $143 from $141, on sales of high-end handsets. The company noted a sequential drop in operating margin to 12.8% from 15.5%, based on increased marketing costs for the Olympics, the company said.
Samsung’s handset business has strengthened in the past year or so on its rapid delivery of a broad range of touchscreen and large display handsets in the mid- and high-tier, particularly in the United States market.
Meanwhile, the former No. 2, Motorola Inc., has seen its market share plummet globally, likely to No. 4, according to an estimate by Avian Securities L.L.C.
Motorola itself has forecast flat to slightly positive growth in handset shipments, which would roughly translate to 27.4 million units – still No. 4 for the quarter. Avian Securities also projected a decline in Motorola’s North American market, where it is attempting to fend off gains by Samsung and LG.
Motorola, the last of the top-tier vendors to report, will deliver earnings July 31.