Samsung Electronics Suffers $9 Billion Sell-Down

[Anonymous]

Samsung Electronics Suffers $9 Billion Sell-Down

By MarketWatch SEOUL — Samsung Electronics Co.'s market value fell by nearly $9 billion on Thursday amid concerns about slowing growth at its mobile business.

Investors fear the world's largest maker of mobile phones will continue to report slower profit and sales growth in smartphones as competition intensifies and less-expensive devices push down prices. Mobile devices have driven profit at the South Korean company over the past two years, accounting for more than 50% of its operating profit. Samsung also makes semiconductors, television sets and home appliances.

Some of Samsung's smartphone competitors have started to reduce prices to gain market share. Google Inc.'s Motorola Mobility unit this week cut the price of its Moto X smartphone to $399 from $550, substantially below Samsung's Galaxy S4, which costs about $600 without a contract in the U.S.

Samsung's shares closed 4.6% lower Thursday at 1.31 million won ($1,241), knocking down its market value 9.3 trillion won ($8.8 billion), to 192.8 trillion won. The decline helped lead to a 2.2.% drop in the Kospi index.

It was Samsung's biggest one-day percentage drop in seven months and mirrored the sharp decline last June when investors began to lose confidence in Samsung's earnings growth. Samsung's shares fell 9.9% last year while the Kospi index rose 0.7%.

"Uncertainty surrounding the company's earnings results makes me cautious," said Im Jeong-jae, a fund manager at Shinhan BNP Paribas Asset Management, which manages $7.2 billion of Korean stocks.

Samsung declined to comment.

Analysts expect Samsung to report its fourth-quarter operating profit rose 9.2% from a year earlier to 9.65 trillion won on sales of 60.4 trillion won. That would be sharply lower than the 26% gain in the third quarter.

The company is scheduled to release its fourth-quarter forecast on Tuesday and its results at the end of the month.

Analysts expect Samsung's mobile division to post an operating profit of 6.2 trillion won — up 14% from a year earlier but down 8% from the third quarter.

Mirae Asset Securities on Thursday lowered its estimate for Samsung's fourth-quarter operating profit by 6.2% to 9.3 trillion won.

"The proportion of less-premium smartphones appears to have increased within the portfolio, squeezing margins," said Doh Hyun-woo, an analyst at the brokerage. Unusually high bonus payments to Samsung employees and the recent strengthening of the Korean won, which makes Samsung's products less competitive overseas, also weighed on results, he said.

Analysts also are concerned about falling prices for TV sets, driven by low-cost rivals in China. Samsung has been trying to stand out in the market by introducing curved-screen TVs but their steep price has deterred consumers.

Samsung Electronics Suffers $9 Billion Sell-Down

By MarketWatch SEOUL — Samsung Electronics Co.'s market value fell by nearly $9 billion on Thursday amid concerns about slowing growth at its mobile business.

Investors fear the world's largest maker of mobile phones will continue to report slower profit and sales growth in smartphones as competition intensifies and less-expensive devices push down prices. Mobile devices have driven profit at the South Korean company over the past two years, accounting for more than 50% of its operating profit. Samsung also makes semiconductors, television sets and home appliances.

Some of Samsung's smartphone competitors have started to reduce prices to gain market share. Google Inc.'s Motorola Mobility unit this week cut the price of its Moto X smartphone to $399 from $550, substantially below Samsung's Galaxy S4, which costs about $600 without a contract in the U.S.

Samsung's shares closed 4.6% lower Thursday at 1.31 million won ($1,241), knocking down its market value 9.3 trillion won ($8.8 billion), to 192.8 trillion won. The decline helped lead to a 2.2.% drop in the Kospi index.

It was Samsung's biggest one-day percentage drop in seven months and mirrored the sharp decline last June when investors began to lose confidence in Samsung's earnings growth. Samsung's shares fell 9.9% last year while the Kospi index rose 0.7%.

"Uncertainty surrounding the company's earnings results makes me cautious," said Im Jeong-jae, a fund manager at Shinhan BNP Paribas Asset Management, which manages $7.2 billion of Korean stocks.

Samsung declined to comment.

Analysts expect Samsung to report its fourth-quarter operating profit rose 9.2% from a year earlier to 9.65 trillion won on sales of 60.4 trillion won. That would be sharply lower than the 26% gain in the third quarter.

The company is scheduled to release its fourth-quarter forecast on Tuesday and its results at the end of the month.

Analysts expect Samsung's mobile division to post an operating profit of 6.2 trillion won — up 14% from a year earlier but down 8% from the third quarter.

Mirae Asset Securities on Thursday lowered its estimate for Samsung's fourth-quarter operating profit by 6.2% to 9.3 trillion won.

"The proportion of less-premium smartphones appears to have increased within the portfolio, squeezing margins," said Doh Hyun-woo, an analyst at the brokerage. Unusually high bonus payments to Samsung employees and the recent strengthening of the Korean won, which makes Samsung's products less competitive overseas, also weighed on results, he said.

Analysts also are concerned about falling prices for TV sets, driven by low-cost rivals in China. Samsung has been trying to stand out in the market by introducing curved-screen TVs but their steep price has deterred consumers.

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January 7, 2014 at 11:28 AM