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Contrasting smartphone fortunes for Korean giants

by Scott Bicheno on 7 July 2011, 15:26

Tags: Samsung (005935.KS), LG Electronics (066570.KS)

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Contrasting fortunes

Both the Korean electronics giants have made financial statements recently, which shed some light on their relative performance in the all-important smartphone market.

Reuters reports that Samsung expects its second quarter profit will be down a quarter on a year ago, thanks mainly to losses in its LCD display business. In a subsequent analysis Reuters noted that the phone unit is doing contrastingly well, thanks mainly to strong sales of its flagship Galaxy S II smartphone.

Samsung estimated its quarterly operating profit was around $3.5 billion, which is 25 percent up on the previous quarter, but 25 percent down on a year ago. The size of the company was given some perspective, with an approximate market cap of $134 billion. That makes Samsung bigger than Sony, Toshiba, Nokia, Panasonic and LG combined.

Speaking of LG, it looks like the other Korean giant's smartphone operations aren't doing anywhere near as well. In yet another Reuters report it was revealed that LG has cut its 2011 smartphone sales target from 30 million units to 24 million.

As we saw in the recent US mobile phone market figures, LG still shifts plenty of phones, but they're still mainly of the feature phone variety, where margins are small. This is leading to parallels being drawn with other mobile phone giants struggling to keep up with the smartphone market.

"The next few quarters are going to be brutal. Nokia and RIM are cutting prices and margins to stem eroding market share while others such as Samsung see a window of opportunity to grab share," said said Ben Wood, research director at CCS Insight. "It's a storm that will undoubtedly result in some high-profile casualties."


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