Samsung profits soar as it ups pressure on Apple

By GARETH MACKIE
Published on 25/01/2013 21:43

South Korean electronics giant Samsung has dealt a further body blow to bitter rival Apple after unveiling a better-than-expected jump in profits, confirming its dominant position in the smartphone market.

However, the firm warned that earnings are expected to decline during the current quarter because of seasonally low demand for consumer electronics.

Net profits for the final three months of 2012 totalled £4.2 billion, up 76 per cent from a year earlier and ahead of analysts’ expectations.

Samsung, which overtook Apple as the world’s biggest smartphone maker last year, said operating profits at the division that makes and sells smartphones such as the Galaxy S 3 and Note 2 tablet more than doubled.

The group’s performance has piled the pressure on Apple, which disappointed investors with this week’s quarterly results, despite unveiling record revenues of $54.5bn (£34.5bn).

Apple said iPhone shipments were also a record, but the 47.8 million figure was well below analysts’ forecasts of 50 million units and analysts said the group is losing out to rivals that have launched phones with bigger screens than the iPhone 5’s 4-inch offering.

Analysts believe that Samsung, which counts Edinburgh-based chip developer Wolfson Microelectronics among its suppliers, shipped more than 60 million smartphones during the three months to December, which would put sales for the year at more than 200 million handsets.

Walter Price, of Allianz Global Investors, said Apple needs to introduce more models to win market share back from Samsung and other handset makers that use Google’s Android operating system, “and they need to acknowledge that their margins are unsustainably high”.

Although Apple’s first-quarter margins of 38.6 per cent were down from 44.7 per cent a year earlier, they are still far higher than Samsung’s fourth-quarter figure of 17.4 per cent at its mobile phone business. Price said: “It looks as if 2013 will likely be a difficult year for Apple.”

However, Samsung also sounded a note of caution over the strength of the South Korean won, along with a weakening global economic recovery, and said smartphone demand is expected to ease in the current quarter.

Dominic Sunnebo, global consumer insight director at research firm Kantar Worldpanel ComTech, said: “It’s interesting to see Samsung warning of a smartphone slowdown.

“As most developed markets near or surpass 50 per cent smartphone penetration – it’s 61 per cent in Britain – easy wins are certainly becoming harder to find.”

Samsung also said the uncertain market outlook means its capital spending will remain largely unchanged from 2012, having ramped up investment in recent years to meet soaring demand for its wide range of consumer electronics and mobile devices.

The group is expected to introduce a new flagship smartphone in its Galaxy S series as early as April, which analysts said will help to shore up its

bottom line.