Samsung Predicts Recovery After First-Quarter Earnings Drop 40% 

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Samsung Electronics Co. expects earnings to recover in the second quarter as new Galaxy S6 smartphones lure back users and the component divisions win orders from rival vendors. Shares rose.

Samsung on Wednesday predicted the revival after reporting a 40 percent decline in earnings for the period ended March. Consumers have been switching to Apple Inc.’s larger iPhones and cheaper Chinese devices as the rising South Korean won makes Samsung products more expensive in overseas markets.

Making chips and screens for its own mobile devices while also supplying to rivals may help Samsung blunt the impact from sales gains by Apple, which this week posted a surgein earnings. The Galaxy S6 phones, including the more expensive Edge model with a wraparound screen, were released this month to positive reviews and strong demand that are said to have prompted an acceleration of curved-screen output.

“The second quarter will be brighter as mobile earnings are expected to improve, largely driven by the increased sales of the S6,” said Greg Roh, a Seoul-based analyst at HMC Investment Securities Co. “The pricier Edge device will take up half of the total S6 shipment from May and that will give a strong lift to its mobile business.”

Shares of Samsung rose 1.6 percent to 1,388,000 won as of 9:49 a.m. in Seoul, the first gain in a week.

First-quarter net income, excluding minority interests, fell to 4.52 trillion won ($4.2 billion), the Suwon, South Korea-based company said Wednesday.

Mobile Slumps

“In the second quarter, the company expects its overall earnings to increase,” Samsung said. “In 2015, continued growth is expected due to the growth of emerging smartphone markets, such as China and India.”

Operating profit at the mobile-phone unit slumped to 2.74 trillion won from 6.43 trillion won a year earlier. The company fell into a tie with Apple as the biggest seller of smartphones in the December quarter, according to data from Strategy Analytics Inc.

Samsung has projected record sales for the new high-end smartphones. Samsung will sell 46 million units of the S6 models this year, according to estimates from Kevin Lee, an analyst at Korea Investment & Securities Co.

The phone is among the Samsung products featured in the new “Avengers: Age of Ultron” movie as part of a global partnership with Marvel Entertainment.

Production Increase

Demand for the curved screen prompted the company to accelerate production, people familiar with the matter have said. The company can make 5 million units a month, they said.

Apple this week posted a 33 percent jump in profit in the quarter that ended in March, driven by strong demand for iPhone 6. IPhone unit sales jumped 40 percent to 61.2 million, topping analysts’ average prediction for 58.1 million, based on data compiled by Bloomberg.

Profit at Samsung’s semiconductor business, which makes both memory chips and application processors, was 2.93 trillion won, compared with 1.95 trillion won a year earlier.

Samsung, which previously relied on semiconductors from Qualcomm Inc. for its best-selling mobile devices, switched to its own processor and modem chips for the S6 lineup.

The company is also said to have won orders for the main processors in the next iPhone.

Seasonal Demand

The consumer-electronics division, which oversees TVs and home-appliances, posted a 140 billion-won loss in the quarter from a 190 billion-won profit a year earlier. Samsung expects the unit to have a stronger second quarter on seasonally higher demand for air conditioners and high-end TVs.

Increasing sales of high-margin screens helped Samsung’s panel-making division return to operating profit of 520 billion won in the first quarter.

Samsung Display Co. is expanding sales of its organic light-emitting diode, or OLED, panels from Galaxy devices to Chinese device makers, including Lenovo Group Ltd.

Samsung Display, which is 85 percent owned by Samsung Electronics, is said to havecreated a standalone team of about 200 employees to work exclusively on Apple products.

Capital spending in 2015 will be similar to the year earlier, Samsung said.

Source: Bloomberg – Samsung Predicts Recovery After First-Quarter Earnings Drop 40%

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