
Analysts Put Damper On Samsung's Strong Pre-Earnings Report
11:23 AM EST Fri. Oct. 05, 2012Samsung said Friday it expects another record-high operating profit for the third quarter, but analysts are predicting the Korean tech giant may be nearing its financial peak, with growth starting to stall in the fourth quarter and into next year.
In its third-quarter pre-earnings guidance, Samsung said it expects its operating profit to be roughly $7.3 billion, up from the $5.9 billion it reported during the previous quarter, and a significant jump from the $3.8 billion it reported during the third quarter of last year.
Samsung, one of the world's largest manufacturers of consumer products including televisions, home appliances and PCs, has attributed much of its recent growth to its mobile device business, which churns out its popular line of Android-based Galaxy tablets and smartphones. Most recently, the company's new Galaxy S III smartphone has been a major source of growth, propelling Samsung to the top spot in worldwide smartphone market share, according to Gartner, with 21.9 percent.
[Related: Samsung Issues Software Update For Galaxy S III Vulnerability]
But industry analysts predict that Samsung's growth may soon slow down, given the $1.05 billion in damages it has to pay rival Apple after being found guilty in August of infringing on several design patents for the iPad and iPhone.
"Fourth-quarter profit will be pressured by one-off expenses of performance payouts and some $1 billion legal provisioning relating to Apple litigation. But excluding these one-offs, core earnings will remain solid and a swing factor is how much Samsung spends in marketing," said Lee Sun-Tae, analyst at NH Investment and Securities, as reported Friday by Reuters. "Samsung won't be able to further increase handset profits sharply from the current level but they'll hang on to this level of profit, helped by solid product portfolios."
Other analysts predict that Apple's latest smartphone, the iPhone 5, could deal a blow to Samsung's handset business. To brace itself, Samsung will likely pump more cash into its marketing efforts over the next couple of quarters, according to Byun Han-Joon, analyst at KB Investment and Securities.
"Earnings are set to decline in the fourth quarter. Along with increasing smartphone sales, Samsung will need to spend more on marketing, which will naturally reduce its profits. We expect fourth-quarter earnings at around 7.5 trillion won," Han-Joon said, per Reuters' report.
"The biggest risk for Samsung is competitive product lineups from its rivals such as iPhone 5s," Han-Joon continued. "Because handsets drive most of its profits, for Samsung one misstep in handsets could result in losses for the whole group."
Samsung is scheduled to release its full third-quarter earnings results Oct. 26.
PUBLISHED OCT. 5, 2012