Samsung fuels hope for robust 2010; chip unit shines

Tim Baxter, president of the Consumer Electronics Division of Samsung Electronics America, speaks after unveiling (from L-R) LED HDTV 9000, 8000, and 7000, during a news conference before the 2010 International Consumer Electronics Show (CES) in Las Vegas, January 6, 2010.

SEOUL (Reuters) - Samsung Electronics' strong estimates signal a promising year for the consumer electronics industry and offer investors yet another reason to pile into technology stocks.

Samsung is riding a strong price recovery in its mainstay memory chips used in computers, and benefiting from booming sales of flat screen televisions, two areas where it holds the world's No. 1 position.

"Demand for TVs as well as LCD panels and chips remains healthy at the moment, and that will likely pick up toward the Chinese New Year," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management in Tokyo.

Analysts have upgraded their outlook for Samsung, South Korea's biggest company valued at $109 billion, but concerns remain over tougher competition and a strengthening won that weaken Samsung and LG Electronics pricing power.

Japanese rivals including Sony are beefing up LCD TV products to reclaim market share, while Samsung also faces an uphill battle with smartphone leaders such as Apple.

"In handsets and household goods, it looks difficult to avoid the impact of the stronger won, and higher marketing and promotion costs to fight deepening competition will lower margins slightly," said Hana Daetoo Securities analyst Lee Jeong.

Samsung's shares dipped 2.5 percent after closing at a record the previous session. The stock jumped 77 percent last year, outperforming a 50 percent rise in the broader market.

Samsung made a spectacular turnaround late last year from the technology sector slump and further recovery momentum is seen in the usually slow first quarter.

In December, the company last month reshuffled its top management to speed up decision making, naming a new CEO and promoting son of the former group chairman to chief operating officer.

Exports in South Korea, home to global suppliers of electronic gadgets, cars and ships, rose much faster than expected in December from a year ago, indicating world trade was recovering fast.

On Thursday, LG Electronics, Samsung's rival in TVs and mobile phones, set a modest 2010 sales target. Its shares fell 7.6 percent as analysts cited deepening competition in smartphones.

Samsung and LG are the world's second- and third-biggest handset makers, trailing only Nokia, but the Asian firms have lagged in the smartphone market where software matters more. LG depends more on handsets than Samsung.

Google and Dell are entering the phone market and the long-struggled Motorola is also eyeing a boost from smartphones.

"LG's smartphone business is not exactly doing well, so Google's smartphone comes as serious competition," said Yoo Jong-woo, an analyst at Korea Investment & Securities.

STRONG TV TARGETS

On Thursday, Samsung also unveiled an ambitious set of targets for this year's flat-screen TV sales, estimated to jump by around 30 percent from last year.

Robust sales of flat-screen TVs have been another key driver for Samsung as the company established itself as a leader in the premium LCD TV segment which uses light emitting diode (LED). Samsung is also the world's biggest maker of liquid crystal display (LCD) panels.

Samsung's 2010 net profit is set to rise to 12.49 trillion won from an estimated 9.64 trillion won last year, according to analysts polled by Thomson Reuters I/B/E/S. Two months ago, the 2010 consensus forecast was for 12.27 trillion won.

"DRAM will play a cash cow role for Samsung for the time being. Expectations for new products such as e-books will raise demand for NAND chips in the longer term and highlight its growth potential," said Hana Daetoo's Lee.

Samsung estimated preliminary fourth-quarter consolidated operating profit at a median 3.7 trillion won ($3.27 billion) compared with a consensus forecast of 3.54 trillion won from Thomson Reuters I/B/E/S.

The profit estimate, is a sharp improvement from a 0.74 trillion won consolidated operating loss in the 2008 fourth quarter, although smaller than a 4.23 trillion won profit in the previous quarter.

Samsung estimated fourth-quarter consolidated sales at a median 39 trillion won, which would be a record, in a range of 38 trillion-40 trillion won. It is due to report official quarterly results later this month.

(Additional reporting by Kim Yeon-hee and Jungyoun Park in Seoul and Kiyoshi Takenaka in Tokyo; Editing by Jonathan Hopfner and Anshuman Daga)