* Q3 operating profit estimated at record 8.1 trln won
* Q3 sales estimated at 52 trln won
* Q4 profit may dip on competition, marketing, bonuses -
* Samsung shares down 0.5 pct
By Miyoung Kim
SEOUL, Oct 5 Samsung Electronics
reported a record quarterly profit of $7.3 billion, nearly
double last year's figure, as strong sales of high-end TVs and
Galaxy smartphones more than offset reduced orders for chips and
screens from Apple Inc, its main rival and leading
Most analysts, however, expect a run of four straight record
quarters to end in December as the South Korean group, the
world's leading maker of smartphones, TVs and memory chips,
ramps up its marketing to counter Apple's new iPhone and other
products in a crowded $200 billion global smartphone market.
Samsung may have spent around $2.7 billion on marketing in
July-September alone around the London Olympic Games and new
Galaxy promotions, Credit Suisse has estimated.
This year's expected record profit of 28 trillion won ($25
billion) will also trigger higher performance related payouts to
many of Samsung's 206,000 staff early next year. And Samsung may
have to set money aside this quarter if it fails in an appeal to
overturn an Aug. 24 U.S. court verdict that awarded more than $1
billion in damages to Apple for patent infringements by Samsung.
"Fourth-quarter profit will be pressured by one-off
expenses: performance payouts and some $1 billion in legal
provisioning relating to the Apple litigation. Excluding those,
core earnings will remain solid and a swing factor is how much
Samsung spends on marketing," said Lee Sun-tae, analyst at NH
Investment & Securities.
Analysts expect earnings to decline until the second
quarter of next year as a slump in computer sales and a weak
global economy sap demand for chips and electronics products.
"The biggest risk for Samsung is competitive product
line-ups from its rivals such as the iPhone 5. Because handsets
drive most of its profits, one misstep in handsets could result
in losses for the whole Samsung group," said Byun Han-joon, an
analyst at KB Investment & Securities.
Profit at Samsung's mobile division is likely to have more
than doubled in July-September to around 5 trillion won - around
two thirds of total group profit - as smartphone shipments
topped 58 million, including up to 20 million Galaxy S IIIs.
Ahead of full quarterly results due by Oct. 26, Samsung
estimated its July-September operating profit jumped 91 percent
to 8.1 trillion won from a year ago, beating an average forecast
of 7.6 trillion won in a Reuters survey of 16 analysts. That
would be more than a fifth higher than the previous record in
April-June. The company, valued at around $197 billion,
estimated its third-quarter revenue at 52 trillion won, in line
Samsung shares fell 0.5 percent to 1.36 million won ($1,200)
on Friday. The stock has risen more than 7 percent since the
U.S. patent defeat in August. Apple shares have gained less than
CHEAP AS CHIPS
Strong handset sales made up for reduced profits from its
chip business, as prices of its mainstay dynamic random access
memory (DRAM) chips, used in computers and mobiles, dropped 14
percent in the September quarter. DRAM chips now trade below
what it costs most contract manufacturers to make them, and will
squeeze near-term earnings, analysts say. Tablets and
smartphones, the real growth areas, use far smaller memory
Samsung is expected to invest less in chips next year due to
the drop in demand, which could be bad news for semiconductor
equipment manufacturers such as ASML. Kwon Oh-hyun,
promoted to Samsung CEO in June, said late last month that the
group has yet to finalise its 2013 investment plans.
Samsung is beefing up its product line-up, with the latest
phone-cum-tablet Galaxy Note expected to go on sale in the
United States this month, and its ATIV smartphones that run on
Microsoft's new Windows system to compete with Nokia's
Samsung's mobile division chief JK Shin last week predicted
Note II sales could be three times higher than those of its
predecessor model in the three months after launch - suggesting
sales of around 10 million devices by the end of this year.
Some analysts see the Note II, a stripped-out, cheaper
version of the Galaxy S III and rising NAND flash memory chip
prices helping Samsung deliver higher fourth-quarter profit.
Nomura on Friday predicted October-December profit could be up
to 10 percent more than the 8.1 trillion won in July-September.
In a note on Friday, Citi analyst Henry Kim predicted strong
October-December profits, driven by a recovery in
semiconductors, though telecoms operating margins could decline
by 5 percentage points to 15 percent as it spends more on
marketing. "The semiconductor division will show the strongest
momentum," he said.
Despite a bruising series of patent disputes and the
reputational risk of the U.S. court defeat in August, Samsung's
brand value has surged this year as it shipped more handsets and
smartphones than any of its rivals. The value of the Samsung
brand has jumped to 9th in the world - up from 17th last year -
at $32.9 billion, according to brand consultancy Interbrand.
That's more than Toyota Motor, but less than half of
second-ranked Apple's $76.6 billion.