Samsung Soars After Rough Year -- WSJ
27 July 2017 - 5:02PM
Dow Jones News
By Timothy W. Martin and Eun-Young Jeong
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 27, 2017).
SEOUL -- Samsung Electronics Co. delivered its biggest-ever
quarter of profits, shrugging off a year of tumult by leaning on
its dominance as a supplier of electronics components that even its
rivals can't do without.
Samsung said net profit jumped to 11.05 trillion South Korean
won ($9.9 billion) for the three months ended June 30, an 89% rise
from 5.85 trillion won for the same period a year earlier. Revenue
shot up to 61 trillion won from April to June, rising from the
prior year's second quarter of 50.94 trillion won.
The South Korean technology giant blew past its previous record
quarterly net profit of 8.24 trillion won, which came nearly four
years ago as booming smartphone sales drove growth. In a shift from
those days, components such as semiconductors and display panels,
sold to competitors such as Apple Inc. or Sony Corp., account for
about 70% of the firm's bottom line.
Samsung's profits were also boosted by strong sales of the
Galaxy S8, its first premium smartphone since last year's global
recall of the Galaxy Note 7. Samsung said the Galaxy S8 and the
larger S8+, which won strong reviews for their sleek design, have
outsold its predecessor, the Galaxy S7, in almost all regions.
Operating profits also rose 73% to 14.07 trillion, an all-time
high, over the 8.14 trillion reported in the same period last
year.
The record-breaking results also position Samsung to top Apple
in quarterly profits. Apple has a projected net income of $8.2
billion for the three-month period, according to analysts polled by
S&P Global Market Intelligence, in what is traditionally a
weaker quarter for the world's most-valuable company. Apple, set to
launch its 10th-anniversary iPhone, is still projected to notch up
larger full-year profits than Samsung.
Samsung Electronics shares are trading near all-time highs and
have risen more than 60% over the past year. On Thursday, Samsung
said it would continue a 9.3 trillion-won share buyback program
this year, repurchasing 670,000 common shares and 168,000 preferred
shares over the next three months. Samsung has so far repurchased
about 5 trillion won worth of shares.
Less than a year ago, Samsung's potential ascension to the
world's most-profitable technology company, even for a singular
quarter, would have seemed bold. Last fall, its Galaxy Note 7
devices overheated, and some caught fire, handing Samsung a crisis
that ended with an embarrassing global recall that cost the company
more than $5 billion. Then in February, Samsung's de facto leader,
Lee Jae-yong, was put behind bars, accused of having a role in the
country's corruption scandal. Mr. Lee denies wrongdoing and is
standing trial.
Even without its leader, its chic brand tarnished, the Suwon,
South Korea-based firm saw its profits balloon due to voracious
demand for its memory chips and flexible displays, mundane products
that few consumers even realize are Samsung-made.
More than a decade ago, Samsung began plowing billions of
dollars into 3-D NAND semiconductors that can store more content in
a small chip, allowing gadgets extra memory capacity. The company
also moved aggressively into flexible OLED displays, short for
organic light-emitting diodes, which enable phone makers to create
sleeker, thinner devices.
Despite the record quarter, the question hanging over the
company's head is the fate of Mr. Lee, Samsung Electronics vice
chairman and grandson of the company's founder. Mr. Lee isn't known
as a micromanager, but in South Korea's family-run chaebol system,
his signoff is required for overall strategy moves and important
decisions.
The Harvard-educated Mr. Lee has tried to modernize the
company's opaque and hard-driving culture since his father,
Samsung's chairman, became incapacitated with a heart attack in
2014. He has also pushed the Samsung conglomerate, which spans
dozens of enterprises as varied as theme parks and lithium-ion
batteries, to slim down and pivot to new areas such as
biotechnology.
Per South Korean law, Mr. Lee, 49 years old, can be detained
until late August. A verdict is expected from a lower court next
month. Mr. Lee is expected to testify next week in court.
Write to Timothy W. Martin at timothy.martin@wsj.com and
Eun-Young Jeong at Eun-Young.Jeong@wsj.com
Corrections & Amplifications Samsung last topped Apple's
quarterly results in 2010. An earlier version of this article
incorrectly stated that Samsung's results position the company to
top Apple in quarterly profits for the first time. (July 26)
(END) Dow Jones Newswires
July 27, 2017 02:47 ET (06:47 GMT)
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