Eoin Treacy's view -
Samsung Electronics Co. reported its worst operating-profit drop in more than four years, buffeted by falling memory-chip prices and slowing smartphone sales.
Operating income fell 60 percent to about 6.2 trillion won ($5.5 billion) in the three months ended March, according to preliminary results released Friday from the Suwon, South Korea-based company. That was the biggest decline since a similar drop in the third quarter of 2014. Analysts surveyed by Bloomberg had expected a 56 percent slump to an average of 6.93 trillion won.
Samsung issued a rare warning last month that its results would be short of estimates, reflecting slower orders from data center owners such as Amazon.com Inc. and handset makers including Apple Inc. That’s pushed down prices for both DRAM and NAND memory and compounded the struggles for the South Korean company as it counts on new devices such as the Galaxy S10 smartphone to help it fight back against increased competition.
“We do expect server DRAM demand to pick up as well as the S10 sales and foldable-phone sales to be better than expected going into the second half.” Daniel Yoo, global strategist at Kiwoom Securities, told Bloomberg TV. “Therefore the earnings pickup should lead the share price going into the future.”
Samsung Electronics trended lower for more than year from its 2017 peak but has perked up over the last three months as the potential for earning growth later in the year is priced in. The company is a bellwether for the electronics industry since it is a major supplier of chips, memory and consumer goods. It’s impressive near 200% advance from early 2016 was a clear sign of improving perception of global growth so it is continued ability to hold the region of the trend mean is an important arbiter of whether the global reflation trade can continue to animate investors’ animal spirits.
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