South Korean electronics giant is now a firm number one in the smart phone business

It may not have tried to patent multi-touch, bouncing animations, or the swipe unlock, but South Korea's Samsung Electronics Comp., Ltd. (SEO:005930) is doing what it's best at -- making industry leading components and electronics.

I. Samsung Outsells Apple 8-to-5 in Smartphones

The company announced a strong quarter on Thursday.  

Leading the way was the company's telecommunications (phone) business, which reported selling 28 million smartphones in Q3 2011.  That's four times what Samsung sold last year and it's 65 percent more smartphone units than arch-rival Apple, Inc. (AAPL) sold in the quarter.

Robert Yi, Vice President and Head of Investor Relations, cheered his company's success, stating, "Despite the difficult business environment due to the economic slowdown in developed markets, Samsung achieved a solid performance and recovered its double-digit operating profit margin in the quarter, driven by strong sales of our smartphones."

Galaxy S II
Led by the Galaxy S II, Samsung's smartphone lineup proved much more popular in terms of sales than its rival Apple's lone product. [Source: Samsung]

The unit reported 14.90T KRW in sales ($13.49B USD) and 2.92T KRW in profit ($2.64B USD).  

II. Other Units Struggle

Factoring in the company's other core businesses, including PC sales, LCD TV sales, component sales, and more, the company reported 41.27T KRW in total sales ($37.65B USD), a 3 percent increase from a year ago.  Total profits 23 percent from a year ago to 3.44T KRW ($3.11B USD).

The company did struggle some in its display business, which lost 90B (won) ($81.45M USD).  Prices on TV displays and PC displays declined and sales essentially held steady. The only factor keeping the unit from posting a bigger loss was better-than-expected OLED display demand.

Samsung NAND
Prices on Samsung's NAND storage chips rebounded. [Source: Samsung]

Despite Apple -- Samsung's biggest component customer -- trying to sever its supply contracts due to the firms' eroding relationships, Samsung's component business managed to maintain profitable.  DRAM and NAND prices, depressed earlier in the year, jumped back up after several manufacturers exited the market.  As a result, Samsung -- again -- saw less than expected losses.  The component unit posted sales of 9.48T KRW ($8.67B USD) and profit of 1.59T KRW (1.44B USD).

III. Looking Ahead.

Looking ahead Samsung does face some threats to its ongoing business and profitability.  Apple's slew of international lawsuits [1][2][3][4] [5][6][7][8] against Samsung's smartphones and tablets could hamper sales, should Apple achieve its effective goal of banning its competitor from the market.  And then there's the issue of the $10 USD+ per Android smart phone Samsung has to cough up to keep Microsoft Corp. (MSFT) from suing. 

Still, given Samsung's record-shattering-sales and solid position atop the smartphone business, these issues weren't enough to stop Samsung's stop from posting decent 2-3 percent gains in the day's trading.

“Then they pop up and say ‘Hello, surprise! Give us your money or we will shut you down!' Screw them. Seriously, screw them. You can quote me on that.” -- Newegg Chief Legal Officer Lee Cheng referencing patent trolls

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