Samsung Electronics Co said on Friday its first quarter profit jumped to a record high as smart phone sales remained strong despite the April launch of an updated version of its flagship Galaxy phone.
Sales of consumer electronics usually slow in the first three months of the year after the holiday shopping season, an effect that analysts thought would be compounded by this month’s release of the Galaxy S4 smartphone since many delay buying until the newest model is available. Apple Inc has cited the upcoming release of a new iPhone as a reason for a slowdown in sales of older models.
Samsung began sales of the S4 in its home South Korean market today and starts US sales tomorrow. Analysts expect Samsung’s profits to reach new highs in the second and third quarters if S4 sales are strong. Lee Don—Joo, head of sales and marketing at Samsung’s mobile division, said sales of the S4 will outdo its predecessor, the Galaxy S III.
Samsung said January—March net profit surged 42 per cent to 7.2 trillion won (USD 6.5 billion) from 5 trillion won a year earlier. That increase was despite booking a one—time charge against earnings related to settlement of its intellectual property battle with Apple. Analysts estimated the charge at USD 600 million.
Sales rose 17 per cent to 52.9 trillion won. Operating profit was up 54 per cent to 8.8 trillion won, in line with its preliminary results released earlier this month.
Profit was up 2 per cent from the previous quarter’s result, beating market expectations for a fall. Sales of the S III smartphone and the oversized handset called the Galaxy Note remained strong and shored up profit, Samsung said. It also spent less on marketing its mobile devices than it did in the previous quarter when competition heated up.
Samsung’s IT and Mobile Communications division that makes smartphones, tablets, PCs and cameras reported 6.51 trillion won in operating income for the first quarter, up 56 per cent from a year earlier and its highest since Samsung reorganized the division to merge PC and handset departments.
Samsung capitalized on global demand for smartphones with a range of mobile devices that come in a variety of screen sizes and prices, outpacing rivals including Apple Inc and Nokia Corp.
As the S4 goes on sales several months before rival Apple introduces a new version of iPhone, analysts said Samsung’s streak of record—setting profit will not stop any time soon.
“You can say it is like a snowball is rolling,” said James Song, head of technology at Daewoo Securities. Song forecast Samsung’s second quarter operating income to surpass 10 trillion won (USD 9 billion).