Samsung profit hits $7.3-B in Q1

Posted at 04/29/2014 11:35 AM | Updated as of 04/29/2014 5:00 PM

SEOUL - Samsung Electronics reported Tuesday a 5.9 percent year-on-year increase in first quarter net profit to 7.57 trillion won ($7.3 billion) but operating profit declined for a second straight quarter on slowing smartphone revenue.

Operating profit stood at 8.49 trillion won for the January-March period, down 3.3 percent from a year ago, following a 6.0 percent decline in the fourth quarter.

Overall sales in the first quarter inched up 1.53 percent to 53.7 trillion won, but were down 2.5 percent for the mobile business unit, which has driven the South Korean electronic giant's record profits of recent years.

Alarm bells have been sounding for a while over Samsung's reliance on smartphone sales in mature markets such as Europe and the United States, and increasingly competitive emerging markets such as China.

The world's largest smartphone maker has a diverse product line ranging from memory chips to home appliances, but more than half its profits are generated by mobile devices.

This month saw the global roll-out of the latest version of the flagship Galaxy series smartphone, the S5, whose performance will be closely watched.

While reviews have rated the S5 a top-class product, they note that it offers little in the way of real innovation that would set it apart from previous versions and models offered by competitors such as Apple.

Samsung made margin concessions with the S5, launching it at a slightly lower price than its predecessor the S4 and throwing in a premium software bundle estimated at more than $500.

The strategy appeared to have met with some success, as the net profit figure released on Tuesday beat most analyst estimates.

The company's bottom line was also boosted by a 22.8 percent surge in memory chip sales from the first quarter of 2013 to 6.29 trillion won.

There is a general consensus that smartphone evolution has hit a barrier that will only allow incremental improvements on existing design and technology, rather than market-changing re-invention.

Samsung and South Korea's other export powerhouses are also feeling some strain from the strength of the Korean won.

Samsung said sharp currency swings cost it 700 billion won ($676 million) of lost revenue in the fourth quarter of 2013.

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