Samsung Sees Higher Q2 Handset Earnings; U.S. Supply Crunch to Ease
Samsung Electronics Co expects sales of its new Galaxy S III, launched at the end of last month as a main rival to Apple's iPhone, to top 10 million during July, making it the South Korean group's fastest selling smartphone.
It also predicted earnings from its handset division would be higher in the current second quarter than in January-March, countering market concerns that tight supplies of the new Galaxy model and the weak global economy would pressure earnings at Asia's most valuable technology firm.
Shares in Samsung dropped 4.2 percent on Monday to a four-and-a-half month low, after more brokers cut their quarterly profit outlook, citing concerns over its chip and telecoms businesses. The benchmark KOSPI stock index was down 1.2 percent.
"The overall market condition was challenging due to euro zone issues and tight supply of components ... but (our) second-quarter results will be better than the first quarter," JK Shin, head of Samsung's mobile division, told reporters.
Profit from Samsung's mobile division nearly trebled in January-March to $3.6 billion, accounting for 73 percent of group operating profit.
"Looking beyond its current weakness in the chip sector, it appears investors are also worried that global macroeconomic woes may eat into handset sales in the second half," said Han Seung-hoon, an analyst at Korea Investment & Securities.
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Samsung kicked off global sales of its Galaxy S III on May 29, but shipments have been affected by the tight supply of parts such as the handset casing for the pebble-blue model.
In the United States, where sales were launched last Thursday, major carriers including Sprint Nextel Corp, T-Mobile and AT&T have not been able to offer the Galaxy with 32 gigabytes of memory, partly due to tight supply.
"Due to overwhelming demand for the Galaxy S III worldwide, Samsung has informed us they will not be able to deliver enough inventory of Galaxy S III for Sprint to begin selling the device on June 21. We are working closely with Samsung on a delivery schedule to support our launch," Sprint said on its web site. It has yet to start shipping pre-orders for the 32 GB version.
"We're getting far better reviews on S III than we did with its predecessors globally ... and supply simply can't meet soaring demand. We've sent executives and staff to almost all our (component) suppliers to ensure a smooth offering and hopefully things will get better from next week," Shin said.
Samsung launched its first Galaxy model two years ago in a rush to counter Apple's iPhone success. Then, Samsung's smartphone market share was below 10 percent. It has since overtaken Apple, and the company said in late April that new Galaxy smartphones would "substantially contribute" to second-quarter results.
Analysts have downgraded estimates for Samsung's second-quarter smartphone shipments in recent weeks, predicting that sales of the latest Galaxy model have triggered a steeper than expected drop-off in sales of earlier products. They also cited tight supply of the S III model and growing competition from low-end manufacturers such as Huawei Technologies and ZTE Corp .
Shin said Samsung was also doing well in the low-end segment of the smartphone market.
JPMorgan cut its forecast for Samsung's second-quarter smartphone shipments by a tenth to 50 million units.
Samsung sold 44.5 million smartphones in January-March - equal to nearly 21,000 every hour - giving it 30.6 percent market share. Apple sold 35.1 million iPhones, taking 24.1 percent market share. (Additional reporting by Joonhee Yu; Editing by Richard Pullin and Ian Geoghegan)