By Alexandra Burlacu | Apr 29, 2012 10:44 AM EDT
Galaxy smartphone sales have surged, driving Samsung Electronics' earnings to a record high in the first quarter. Though this is usually a tough season for the global consumer electronics industry, Samsung managed to outshine its rivals with strong quarter earnings.
According to analysts, Samsung likely sold more smartphones than Apple in the first quarter, and gained more than 70 percent of its operating profit from mobile businesses. The company's net profit nearly doubled from the previous year to a record KRW5.05 trillion won ($4.46 billion) for the fiscal quarter ended March 31.
Samsung also marked a record high in terms of operating profit: 5.85 trillion won, meaning a 98 percent rise year-on-year. Sales climbed 22 percent from the previous year to 45.3 trillion won.
Lower Profit from Memory Chips
Strong demand for high-end Galaxy smartphones helped attenuate lower profit from memory chips, another flagship business for Samsung. The company expects to break its record profit in the coming quarters. Samsung will unveil its next-generation Galaxy phone on May 3, and global demand for PCs is picking up, which will earn more cash for the Korean company.
"Despite difficult business conditions including low seasonal demand for major products such as PCs and TVs amid a global economic slowdown, we achieved record quarterly results based on our differentiated products and technology leadership," Robert Yi, Samsung's senior VP and head of investor relations, said on a conference call. "We cautiously expect our earnings momentum to continue going forward, as competitiveness in our major business is enhanced."
Surging Sales of High-End Smartphones
Samsung's mobile communications divisions earned 4.27 trillion won of operating profit in the quarter, due to surging sales of high-end smartphones in developing markets including China, a key market for mobile makers. The company narrowly beat Apple in last year's smartphone shipments, taking 20 percent of the global market. Apple claimed 19 percent, according to Strategy Analytics. Moreover, analysts estimated that Samsung's smartphone sales during the quarter exceeded Apple's sales (35 million iPhones) by a large margin.
On the other hand, Apple's iPhone and iPad business is still more lucrative. Apple earned $11.6 billion in the quarter ended March 31, more than twice as much as Samsung. Its revenue, however, was about 10 percent less. Once a rookie in the smartphone business, Samsung quickly moved forward and now challenges Apple with its Google Android operating system.
Sales of iPhones and iPads Boost Samsung's 1Q results
Samsung and Apple have ongoing patent battles on four continents, but strong sales of Apple's iPhone and iPad still boosted Samsung's first-quarter results. Apple is Samsung's key customer in its semiconductor and display business, and had a major role in turning Samsung's display panel division into profit.
Samsung's display panel business reported a 280 billion won, on account of increased sales of 3-D TV panels and high-resolution Tablet PC panels. Meanwhile, Samsung said its operating profit from its semiconductor business reached 760 billion won in the first quarter, which is less than half from the previous year.
(reported by Alexandra Burlacu, edited by Dave Clark)