Samsung posts record first quarter profit on smartphone boom

SEOUL, S.KOREA: Samsung Electronics, the world's top technology firm by revenue, posted record quarterly profits of $5.15 billion on booming sales of its Galaxy smartphones and the Note, a mini-tablet and phone.

Samsung, which raced to the top of the global smartphone rankings last year with close to a fifth of the market, from just 3 percent in 2009, should consolidate its position against Apple Inc and others with more product launches, including a revamped Galaxy S, over the next few months.

January-March operating profit was 5.8 trillion won, almost double the year-ago level and better than a consensus forecast of 5 trillion won from analysts surveyed by Thomson Reuters I/B/E/S. It also topped the preceding quarter's previous record of 5.3 trillion won.

Revenue was 45 trillion won.

Samsung, Asia's most valuable technology firm worth some $191 billion, released its January-March estimates on Friday ahead of detailed quarterly results due on April 27.

"There was a big surprise in profit, while revenue was in line, which suggests a stronger than expected profit margin from the handset division thanks to robust sales of high-end models like the Galaxy S and Note," said Choi Do-yeon, analyst at LIG Investment & Securities.

"Handset margins are estimated to have topped 20 percent and profits from the division also topped 4 trillion won. This is really a blowout result and there could be more surprises in the coming quarters as other businesses such as chips show recovery."

Samsung is expected to have shipped a record 44 million smartphones in the first quarter just ended, up by almost 25 percent from October-December levels, according to a Reuters survey of analysts.

Samsung introduced the Galaxy Note, a mini-tablet and phone with a screen half the size of the iPad, in late October, and the top-end model has quickly become its core profit earner.

Sales of the Note, which has revived the throwback stylus function, have topped 5 million, increasing the pressure on gadget strugglers HTC, Nokia and Research in Motion.

"Sales of the Note were very good and it's become Samsung's fresh money generator," said Lee Seung-woo, an analyst at Shinyoung Securities, speaking ahead of Friday's estimates.

The handset division is likely to account for around two thirds of Samsung's total profits, analysts forecast.

WINNING FORMULA

While Apple is Samsung's biggest rival in smartphones, the U.S. company is also its biggest client, gobbling up Samsung's high-end displays and microchips for its iPhone and iPad.

"Samsung's integrated business model - for instance, it makes its own application processors and AMOLED screens - is the biggest ingredient of its winning formula, which, in our view, can't be easily copied," Daniel Kim, an analyst at Macquarie, wrote in a research note.

Song Myung-sup, an analyst at HI Investment & Securities, forecast Samsung's smartphone market share gains would accelerate with the release, probably in June, of the next version of the Galaxy S. "Its smartphone growth momentum will continue at least until the end of the third quarter," he said.

Earnings prospects for memory chips, where Samsung is also a world leader, have also brightened since Japan's Elpida Memory filed for bankruptcy, prompting its customers to switch to rivals such as Samsung and SK hynix to secure supplies of the chips used in smartphones and laptops.

"Contract chip prices are likely to continue to rise in the second quarter, possibly another 10-15 percent, as big customers like Apple, Dell and HP may seek to increase supply in the wake of Elpida's trouble," said Choi Sung-jae, an analyst at SK Securities.

Samsung shares have risen by a quarter so far this year, and hit a life high of 1.351 million won ($1,200) on Wednesday. Over the same period shares in Apple have soared by more than half, taking the California-based firm's value to above $582 billion - more than three times that of Samsung.

The 2nd Circuit quoted an e-mail exchange on August 9, 2005, six months after YouTube's founding, in which co-founder Chad Hurley urged diligence about removing copyrighted content, but met resistance to taking down a CNN clip of a space shuttle.

"I really don't see what will happen. What? Someone from CNN sees it?" co-founder Steve Chen responded.

"The CNN space shuttle clip, I like," co-founder Jawed Karim added. "We can remove it once we're bigger and better known."

HAIR-TRIGGER

Goldman said the decision could add to the costs of online service providers, even small ones, to keep websites running.

"It is not easy for a well-meaning company to establish it is protected under the safe harbor part of the copyright law, even if its service adds significant social value," he said.

"Even start-up companies will need sophisticated legal counsel from day one," Goldman continued. "It will make start-ups more hair-trigger on taking down news or content, for fear that failure to do so will be held against them by content providers."

The 2nd Circuit normally hears cases in three-judge panels. The third judge on the YouTube case died while the case was pending.

In afternoon trading on the Nasdaq, Google shares fell $2.86 to $632.29, while Viacom rose 81 cents to $47.21.

The cases are Viacom International Inc et al v. YouTube Inc et al, 2nd U.S. Circuit Court of Appeals, No. 10-3270; and The Football Association Premier League Ltd et al v. YouTube Inc in the same court, No. 10-3342.