Business

Editor: Bruce Meng
24 Oct 2008 01:08:35 GMT

SEOUL, Oct 24 – Samsung Electronics Co Ltd <005930.KS> on Friday posted a 44 percent drop in third-quarter net profit, but operating profit was 1.02 trillion won, above a forecast of 823.5 billion.

Samsung, the world’s top maker of memory chips and liquid crystal displays (LCDs), reported July-September net profit fell to 1.22 trillion won ($870.5 million) from 2.19 trillion won a year ago and 2.14 trillion won earned in April-June.

Following are some reactions from fund managers and analysts:

SONG MYUNG-SUP, ANALYST, HI INVESTMENT & SECURITIES

“The quarterly figures appear to be pretty good, if not a positive earnings surprise. It seems its digital media business managed to produce smaller than expected losses, probably aided by a weak won. “But the fourth quarter outlook is pretty grim. Chips and display panels will likely suffer a big decline in their profit base, hit by a global economic slowdown.

“I believe the fourth quarter of this year will be a bottom for Samsung. Although the global economic outlook is still uncertain, it will be able to distance itself from its weaker rivals and see an improvement in earnings next year.

“Its shares prices are very attractive, with the price-book value ratio at a near historic-low of 1.4 times.”

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JOHN PARK, AN ANALYST AT DAISHIN SECURITIES

“Net profit in memory chips in the fourth quarter will go down, as DRAM and NAND prices fall. But Samsung will perform better in the flat screen division in 2009, since market demand is expected to go up in the second or the third quarter next year. As for the handset division, due to its aggressive marketing and improvement in distribution channel, Samsung is expected to remain strong.”

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LEE SEUNG-MO, ANALYST, SHINYOUNG SECURITIES

“The results are slightly higher than market consensus but the profit was mainly due to the won’s depreciation. It’s difficult to say that Samsung is in a good state.

“For Q4, the market consensus is fairly low. But then again, it’s hard to predict with the volatile won. DRAM prices have gone down, but that could be compensated for if the won weakens further against the dollar. The market expects about a 20 percent fall in DRAM prices next year.

“For flat screens, the industry is suffering globally. But Samsung keeps itself differentiated and it has steady buyers, so it won’t be as affected as its peers in Taiwan or so.”

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JAY KIM, SEMICONDUCTOR ANALYST, HYUNDAI SECURITIES

“Semiconductor prices have been in the doldrums and there is no recovery in sight as of yet. That is the biggest risk.

“There’s no division that stands out as increasing the operating amount of profit. Every division is likely fall again, Q-Q, year over year, whatever comparison you may use. There is some chance of the weaker Korean won helping to offset the decline of product prices. “The global economic downturn is pressing everybody to consider production or capex or whatever cuts they can make. Whatever cuts they can make, they will be forced to do it in a more severe manner than they originally expected.You can expect the cost cuts from everybody. That will put pressure on semiconductor prices as well as overall capex. “At the end of the day, it will be how soon will the production cuts will be able to catch up with what some would call the collapsing demand situation. (Reporting by Park Jung-hyun, Angela Moon and Jon Herskovitz)