Samsung racks up record profits

Samsung has announced record quarterly profits, aided by one-off gains and best-ever sales of high-end phones.

Samsung racks up record profits

The South Korean firm, which surged past Apple as the world’s top smartphone maker in the third quarter, is quickly building on its supremacy with sleek designs and a rich product line-up, while the latest models from companies such as HTC, Nokia and BlackBerry maker Research in Motion struggle to interest consumers.

Samsung is also weathering a squeeze on its bread-and-butter memory chip business with new revenue sources such as mobile processing chips and high-end OLED displays. Key rivals are increasingly turning to Samsung for components to power their tablets and smartphones.

The South Korean firm posted 5.2 trillion won (£2.9 billion) in quarterly operating profit, smashing well past analysts’ forecasts. It said actual profit may rise or fall by 200 billion won from the preliminary figure when the firm provides detailed earnings later this month.

The result would top Samsung’s previous record profit of 5 trillion won earned in the second quarter of 2010 and is up 22% from the preceding quarter.

One-off gains

One-off gains expected in the fourth quarter include around 500 billion won from the sale of its hard disk drive business to Seagate, and reduced mobile provisions involving royalty payments, according to analysts.

Samsung only entered the smartphone market in earnest in 2010, but its handset division is now its biggest earnings generator. Sales have skyrocketed thanks to a slick production system that rapidly brings new products to market and has mitigated weakness in its component business of mainly memory chips and flat screens.

Its latest Galaxy Note model is touted by some followers as a “phablet” as its 5.3in display and powerful dual-core processor makes it work as both a tablet and smartphone. Its successful debut in some European and Asian markets at the end of 2011 has raised hopes for a solid US launch in coming months.

Taiwan’s HTC, which shocked the market with revenue warnings in recent months, reported on Friday a worse-than-expected quarterly profit drop, its first retreat in two years, as models from the world’s No.4 smartphone maker scrambled to compete with Apple’s iPhone and Samsung’s Galaxy range.

“As expectations for Apple to continue its innovation trail is receding a bit, this will be the year when Samsung solidifies its commanding lead in the smartphone market,” said Kim Yun-sang, a fund manager at IBK Asset Management, which owns Samsung stock.

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