Mobile handsets bolstered sales and profits at Samsung Electronics Co. Ltd. in the fourth quarter, as the Korean handset vendor cemented its No. 2 global position.
The company shipped 53 million handsets in the quarter and garnered 18% global market share, its highest ever. That was nearly half Nokia Corp.’s shipments and more than twice that of its nearest competitor, domestic rival LG Electronics Co.
Samsung is the last of the world’s top handset makers to report earnings for the fourth quarter. Thus, the new ranking for the world’s handset makers is:
On a year-on-year and sequential basis, only Samsung Group’s telecommunications group – which relies on handset sales – showed improvement in the fourth quarter. The parent company’s semiconductor and LCD businesses faltered on falling prices and demand and the parent company posted a loss of $14.4 million on revenue of $13.3 billion for the final quarter of 2008.
Samsung’s volume and share gains in handsets, however, came at the expense of profits. The handset division’s operating profit reached only $115 million in fourth quarter, a big drop from $360 million in the preceding quarter and $417 million in the year-ago quarter. Indeed, the company said that fourth-quarter margins declined due to declining average selling prices (ASPs) and increased marketing expenses in a down market.
Though data is not yet available, it is likely that Samsung also extended its lead in the United States handset market over LG and Motorola Inc. Samsung just promoted its North American chief, Dale Sohn, to executive VP of the parent company in recognition of Samsung’s rise in the U.S. Click here for more info on Samsung’s reorganization.
Of the five top-tier handset vendors, only Samsung and LG shipped more handsets in the fourth quarter than in the preceding quarter, bucking the industry trend of a 5% market contraction.
In Samsung’s case, an attractive handset portfolio and improved distribution channels contributed to success, according to Strategy Analytics.
Still, Samsung fell short of its goal of shipping 200 million handsets for 2008 (it shipped nearly 197 million units, according to Strategy Analytics), which the market research firm attributed to lackluster shipments in emerging markets in the back half of the year. Rivals and analysts have also said that aggressive price-cutting by Samsung in certain markets had boosted its volumes in the fourth quarter but impacted profits, an assertion backed by the vendor’s own numbers.
Samsung’s recent weakness in emerging markets may have led the vendor to reassure its investors, as it did today, that it will focus on low-end handsets for those markets – which would juice volume and market share. And it said it will expand its touchscreen and smartphone offerings at the high end of the market, which would help profits. Samsung also said, apropos of the weakening global economy, that it would operate more efficiently and cut marketing expenses.
Strategy Analytics revised its forecast for 2009 to negative 9% growth – roughly in line with Nokia’s forecast of negative 10% delivered yesterday – and said that the year would be the weakest for handsets since the modern cellphone industry emerged in 1983, a quarter-century ago.
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Samsung earnings at a glance
Samsung Electronics Co. Ltd., the parent company, posted a net loss of $14.4 million on revenue of $13.3 billion for the final quarter of 2008.
The vendor’s telecommunications division, largely driven by handset sales, grew its revenue by about 44% year-on-year and 13% sequentially.
The telecommunication division also posted the only operating profit in the fourth quarter among Samsung’s chip and LCD businesses, earning $115 million. That was sharply down from $360 million in the preceding quarter and $417 million in the year-ago quarter.
For the full year 2008, the company posted net income of $3.9 billion on revenue of $52.6 billion.
