Fifa World Cup 2014 and cheap Galaxy devices help Samsung Q1 profit to $7.2bn

The company shipped 113 million mobile phones and tablet computers in the first quarter while global sports events are reviving TV sales.

Visitors look at a Samsung TV at Gitex Shopper in Dubai. Jeff Topping / For The National

Samsung, the world's largest maker of smartphones, posted first-quarter profit that beat analysts' estimates as demand rose for cheaper Galaxy devices and the Fifa World Cup boosted TV sales.

Net income, excluding minority interests, rose 7.3 per cent to 7.48 trillion won ($7.2 billion) in the three months ended March, the Suwon, South Korea-based company said in a filing today. That compares with the 6.75 trillion-won average of 19 analyst estimates compiled by Bloomberg.

Selling smartphones from less than $150 to more than $900 and expanding its range of tablet computers helped Samsung weather slowing growth in the high-end smartphone segment before releasing its marquee Galaxy S5. New models are helping revive TV sales as global sports events, including the Winter Olympics, drive demand, while chip earnings surge on higher shipments of lower-priced devices in China and India.

“The chip and display businesses will likely lead the earnings improvement going forward,” said Lee Seung Woo, an analyst at IBK Securities Co. “Earnings look better than expected.”

Shares of Samsung fell 1.7 per cent to 1,364,000 won in morning trading in Seoul, erasing its gain for this year. The stock dropped 9.9 per cent last year, its first annual decline since 2008.

Samsung is offering more than $600 worth of incentives for the Galaxy S5 to spark demand. S5 sales are expected to surpass those of the S4, the company said without providing details. Samsung shipped 63.5 million units of the S4 through February, according to the median of three analyst estimates.

The company shipped 113 million mobile phones and tablet computers in the first quarter, it said.

The company boosted its smartphone market share in China to 19 per cent in the fourth quarter from 17 per cent a year earlier, according to researcher Canalys.

India sales grew by almost 37 per cent in the fourth quarter compared with the previous quarter, according to International Data Corp figures.

First-quarter operating profit at the mobile unit, which is responsible for more than 60 per cent of the company’s total profit, was 6.43 trillion won. That is down 1.2 per cent from a year earlier and compares with a record 6.7 trillion won in the quarter ended September 30.

The mobiles unit was expected to post profit of 5.9 trillion won, according to the median estimate of six analysts surveyed by Bloomberg News.

With Chinese producers including Xiaomi Corp. and Lenovo packing premium features such as high-definition screens and faster processors into cheaper devices, Samsung is trying to stand out from other producers with incentives and applications.

Samsung started global sales of the S5 this month, with features including a 5.1-inch screen with a fingerprint reader, 16-megapixel camera, heart-rate sensor and water-resistant coating that can withstand 30 minutes at the bottom of a meter-deep (3-foot deep) pond.

The new device enters a smartphone market where global growth is expected to slow to 6.2 per cent in 2018 from 19 per cent this year, research firm IDC said in February. Already, Samsung’s operating profit has fallen for two straight quarters.

Increasing adoption of fourth-generation services, including in China, and the release of larger tablet computers may help Samsung weather price erosion in smartphones.

“In the global smartphone market, China is the largest market that we should pay a close attention to,” Lee Soon Hak, an analyst at KB Investment & Securities Co., said in an April 15 report. “One of the biggest swing factors for Samsung’s earnings will be China’s demand for advanced network services during the second and the third quarter of the year.”

The company's grip on the large-screen market it pioneered with products such as the 5.7-inch Galaxy Note 3 faces a new threat from other producers. Apple is developing new iPhone designs including bigger screens, a person familiar with the plans said last year.

Samsung will release its next Note in the second half of this year, and the device may feature a three-sided display so messages can be read from an angle.

In January, Samsung announced its largest tablet, with a 12.2-inch screen, as it seeks to win more business customers with features that allow users to split the display into four windows running different applications.

The tablet push will largely offset decreasing smartphone profits, Mark Newman, a Hong Kong-based analyst at Sanford Bernstein, said in an April 14 note.

Profit at Samsung’s chip unit, which supplies its own mobile phones and also those of competitors including Apple, was 1.95 trillion won -- an 82 percent increase from a year earlier.

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