UPDATE 1-Hynix shares drop on outlook, Samsung shines

(Recasts with Samsung shares)

SEOUL, April 28 (Reuters) - Shares in Hynix Semiconductor Inc (000660.KS: Quote, Profile, Research, Stock Buzz) fell sharply on Monday on concerns over a prolonged memory chip glut while rival Samsung Electronics Co Ltd (005930.KS: Quote, Profile, Research, Stock Buzz) hit a two-year high on a strong earnings outlook.

Hynix, the world's No. 2 maker of memory chips, reported on Friday a larger-than-expected quarterly net loss of 675 billion won ($678 million), hit by overproduction and falling prices of dynamic random access memory (DRAM) chips, used in computers.

Bigger rival Samsung also saw losses from its DRAM business but posted a forecast-beating 37 percent rise in first-quarter net profit, thanks to a stellar performance in flat screens and mobile phones.

Hynix shares were down 4.8 percent to 26,750 won by 0235 GMT, lagging the wider market's 0.11 percent gain. Samsung extended gains after Friday's 4 percent rally, rising 3.2 percent to 712,000 won, hitting its highest since February 2006.

"Hynix's poor performance will likely continue for the long term as the expected memory market's recovery in the second half would be limited to a mere seasonal gain," said Park Hyun, an analyst at Prudential Investment & Securities.

Meanwhile, Samsung is set to enjoy its most profitable year since 2004, helped by the weaker won <KRW=> and continuing strength in TV screens and handsets, analysts said.

"While peers burn cash, Samsung may have already bottomed in the first quarter," Citi said in a research note.

Lehman Brothers raised its target price on Samsung by 15 percent to 920,000 won on Monday.