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Samsung's semiconductor unit also posts a strong quarter; company loses 3G anti-Apple lawsuit in Germany

Samsung Electronics Comp., Ltd.'s (KS:005930) created a lot of excitement, when it hinted at a blowout quarter, in pre-earnings talk.  But that excitement has since been overshadowed by Apple, Inc.'s (AAPL) own record-setting 3 months.  Now Samsung has popped back into the picture, with its actual earnings results.  
 
I. A Virtual Tie With Apple

After jumping out to a substantial 65 percent sales lead over Apple in Q3 2011, Samsung is now in a virtual tie with its surging rival in global sales.  Samsung moved 36.5 million units in Q4 2011, compared to 37 million from Apple.

Smartphone sales were a boon for Samsung, whose telecommunications unit reported   17.82T Won (~$15.33B USD) in revenue.  That's approximate 38 percent of the South Korean electronics conglomerate's total 47.3T Won (~$42.14B USD) in sales.  The unit also pulled in net revenue (profit) of 2.64T Won (~$2.35B USD), over half of Samsung's total profit of 5.30T Won (~$4.72B USD).  Overall the telecom unit’s revenue was up 52 percent versus last year, while profit was up 79 percent.

While Samsung's budget feature phones continue to surge in sales, creeping towards Nokia, its iconic smartphones are drawing the most attention.  Samsung was the first OEM to sell an Android 4.0 Ice Cream Sandwich phone in the U.S., launching the Galaxy Nexus around Christmas time.  Its Galaxy S II lineup continues to sell strongly, as well.

Galaxy Nexus

The company has a strong equity position, with over 26.88T Won (~$23.95B USD) in cash.  The company plans 47.8T Won (~$41.59B USD) to research in development in 2012 -- far more than Apple.

Galaxy devices, in hand
Samsung was boosted by strong smartphone and mobile device sales [Image Source: 9to5Google]

Speaking of Apple, Samsung also continues to profit off the success of its rival (and others), thanks to its semiconductor division.  Aside from smartphones, semiconductor sales accounted for the majority of the remaining profit for Samsung.  The unit reported 2.31T Won (~$2.06B USD) on sales of 9.17T Won (~$8.17B USD).  Samsung is reportedly the only remaining profitable DRAM maker.  It continues to perform strongly in the system-on-a-chip business, and it actively expanding production on both the 3x nm (DRAM, SoC) and 2x nm (NAND) nodes.

Samsung's Digital Media and Appliances (DM&A) and display panel businesses struggled amidst slowing stables and the floods in Thailand that hurt component supply.  They did remain profitable, though.  The DM&A pulled in 16.96T Won (~$15.11B USD) in sales, but made only 570B Won (~$507.8M USD) in profit.

Overall this will be remembered as a very strong quarter for Samsung, to cap off a record setting year.  But it will also be overshadowed by Apple's surprising comeback.

II. "Sammy" Loses a Round in its German Case Against Apple

In related news, Samsung has lost yet another lawsuit against Apple, this time in Germany.  Both Samsung [1][2] and Apple [1][2][3][4] have been on losing streaks of late in their lawsuit campaigns against each other.  International courts seem to increasingly be opting to throw out as much of these lawsuits as possible, wary of giving either company an unfair competitive advantage.  Both companies are under investigation in the European Union for abusing the intellectual property system.

Gavel court
International courts are growing tired of Apple and Samsung's lawsuits. [Image Source: Grande Prairie]

Judge Andreas Voss, the presiding judge in Mannheim Regional Court, Mannheim, Germany, gave no reason for the dismissal, according to Florian Mueller of FOSS Patents.  Samsung could still appeal his decision to the Karlsruhe Higher Regional Court, but it's unclear if it will.

Samsung still has 3 more 3G/UMTS cases against Apple in Germany, which it hopes will go better than its last two.  Each of the cases deals with specific patents.  Apple is currently pursuing a new sales ban on Samsung's new tablets, which Samsung redesigned specially to try to satisfy the German court's earlier design infringement claims.

A lower court ruled that the redesign was sufficient, allowing Samsung's tablet sales to resume.  Now it remains to be seen whether that ruling holds.


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How many of the 36.5 million were smartphones?
By tayb on 1/27/2012 11:48:13 AM , Rating: 2
The article mentions 36.5 million "units" sold but then goes on to mention that Samsung's non-smartphone devices that are selling well. Are these non-smartphone numbers included in the "units" or are the units just smart phones?

Either way, Samsung is kicking names and taking ass with smart phones. 18 months ago I would have predicted Motorola or HTC as the "King of Android" but it seems Samsung is just running away with it.




RE: How many of the 36.5 million were smartphones?
By Commodus on 1/27/2012 12:05:58 PM , Rating: 2
The 36.5 (I've seen 33, 35, and 36; Samsung is shy on the hard numbers) is just smartphones.

Perhaps what's telling is how many models each company has. Samsung has seemingly dozens of models (Galaxy Ace, Gio, S, R, S Plus, S II, Nexus...); Apple has three. Where Samsung succeeds is cutting into tiny niches where someone is specific on how much they're willing to pay or where volume makes certain technologies impractical.

Apple works on making the smartphone with the broadest possible appeal, so it may not get that family in Morocco that refuses to pay more than $250 off-contract but will get large swaths of people worldwide.


By nafhan on 1/27/2012 2:30:43 PM , Rating: 2
I'd say it's less "cutting into tiny niches" and more renaming the same phone based on which carrier is selling it. There's also variation in SoC, radio, and screen type, but from what I've seen, Samsung phones from a given generation are all pretty similar in capabilities and price.


RE: How many of the 36.5 million were smartphones?
By acer905 on 1/27/2012 12:30:43 PM , Rating: 2
Looking at this, its 36.5 million smartphones, with an additional 58.5 million non smartphones sold in the same span

http://www.engadget.com/2012/01/27/strategy-analyt...


RE: How many of the 36.5 million were smartphones?
By tayb on 1/27/2012 3:04:03 PM , Rating: 2
Hm. That says shipments, not sales. Which is it? AT&T is playing games with the activation numbers and Samsung is playing games with shipment, not sold, numbers.

I guess technically if a phone is shipped to a store Samsung has technically been paid but I wouldn't really consider that a "sold" phone.


By mondo1234 on 1/27/2012 3:10:39 PM , Rating: 2
Its shipped, not sold, and the numbers didn't come from Samsung, they came from an analyst group.


By Solandri on 1/27/2012 4:57:39 PM , Rating: 4
Unless you're willing to believe there are tens of millions of Samsung phones sitting on store shelves, unsold for years, shipped = sold.

The distinction distorts snapshot views (e.g. phone sales in December), so it can be misleading to compare shipped vs sold in a single month. But it doesn't affect year-long figures since by most contracts the manufacturer is forced to take back excessive inventory which does not sell for a long time (and subtract it from shipped units). Usually they'll instead authorize price cuts steep enough to make the units sell (e.g. HP Touchpad). The manufacturing cost is a sunk cost, meaning any money you can make back selling the phone is better than a return. So in the end, shipped = sold.


By nafhan on 1/27/2012 2:28:25 PM , Rating: 3
We're also comparing data from the one quarter where Apple actually released a new phone... so, either way it's not going to be a terribly meaningful comparison. We need to be looking at year over year or some kind of rolling average of smartphone sales only for it to be meaningful.

As a side note, Samsung is HUGE; they're one of the only companies in the world that is almost completely vertically integrated from a hardware perspective - way beyond what Apple, or Moto, or HTC. They've got the capabilities to literally do everything from building and designing the chips and the screens to the assembly of the device and even loading their own OS (if they wanted). ...and no, I'm not saying this makes Samsung phones better than the iPhone, just pointing out an interesting fact.


By TakinYourPoints on 1/27/2012 9:00:33 PM , Rating: 1
Another question is how many of the Samsung units were actually sold. Apple reports units sold numbers while Samsung and many other companies only report units shipped. It's a big reason why the Android tablet units shipped and their reported online traffic had such a huge discrepancy.

But yeah, Samsung seems to be dominating Android handsets any way you look at it, certainly much larger than HTC or Motorola


By DeluxeTea on 1/30/2012 12:34:58 AM , Rating: 2
From Apple's SEC 10K filing (Part II > Item 7 > Page 26 - Critical Accounting Policies and Estimates > Revenue recognition):

quote:
Net sales consist primarily of revenue from the sale of hardware, software, digital content and applications, peripherals, and service and support contracts. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collection is probable. Product is considered delivered to the customer once it has been shipped and title and risk of loss have been transferred. For most of the Company’s product sales, these criteria are met at the time the product is shipped. For online sales to individuals, for some sales to education customers in the U.S., and for certain other sales, the Company defers recognition of revenue until the customer receives the product because the Company retains a portion of the risk of loss on these sales during transit.


Apple also considers units shipped as sold. Though it is a given that most of their products get sold quickly to the end user and don't typically stay long on the shelves.


wait what?
By talikarni on 1/27/2012 1:26:53 PM , Rating: 2
One story says "Apple crushes Android sales", then this story says one company tied the sales... so which is it DT??? Phone sales from one provider (AT&T) claims iPhones outsold all Androids 4:1, yet this story says Samsung tied the total number of Apple phones sold from all providers...
this leads me to believe that either AT&T is padding their numbers, or purposely having their salespeople overly push the Apple products, or someone somewhere is flat out lying about their numbers.

According to the 2 stories:
Worldwide sales -
Samsung 36.5M
Apple 37M

AT&T alone in US:
Apple 7.6M
non-Apple phones 1.8M

That means between Verizon and AT&T, that is only 11.9M Apple phones (with approximated 1.8M for Tmobile) sold in Q4 2011. Add in the overseas sales and that still only puts Apple in the 25-28M range (worldwide including above mentioned US sales), a far cry from the claimed 37M. Approx. 28M and 37M Apple phones sold are VERY different numbers, so someone is fudging the books somewhere.

Samsung worldwide numbers are fairly consistent with reports in the range of 33 to 37M smartphones, AND 58.5M non-smartphone cell sales (according to Engadget).
How many non-smartphones from Apple are there? Oh thats right, none!




RE: wait what?
By Iaiken on 1/27/2012 3:16:08 PM , Rating: 3
The apple figures include the 3G iPads while the Samsung figures don't include the Tab at all, just smart phones.

This is nothing new, both sides cook the numbers in different ways. Samsung didn't even bother to mention the heaps of money that they make from selling chips to Apple. iPhone, Galaxy, it doesn't matter because Sammy makes money off each and every one of them.


RE: wait what?
By messele on 1/27/2012 3:40:40 PM , Rating: 1
The Apple figures ARE just the iPhone, else they would be quoted as iOS 3G devices right? iPad figures are seperate and somewhere around 15m units.

No, the difference is the numbers talked about earlier in the week related to performance in the US, where the biggest difference lays.

This article relates to global sales of mobile devices classed as "smartphones".


RE: wait what?
By testerguy on 1/28/2012 10:46:39 AM , Rating: 2
Apple figures don't include iPads. Flat out wrong.

Apple makes more money than Samsung full stop, Samsung makes very little profit for iPhones (and for their own phones) because to compete they have to be at a lower price point.

It would harm Samsung more than Apple if Apple decided to stop having Samsung manufacturer some parts (like the rest of the subordinate supply base Apple has)


RE: wait what?
By Azethoth on 1/29/2012 3:55:59 PM , Rating: 1
The problem is that Apple reports phones SOLD, whereas virtually all other companies report phones SHIPPED. Assuming that shipped phones then also get sold the two numbers are roughly comparable but over short periods of time you will get weird results if you try to compare them because it takes time for shipped numbers to become sold numbers.

As an example, if everyone magically stopped buying Samsung phones, then that shipped number eventually also becomes the "buried in landfill" number or however they get rid of them. The actual sold number for those shipped phones then becomes 0. However if people magically stop buying iPhones, the sold number remains the same as it is already a historical fact.

To properly compare the numbers you would have to know the average latency between a Samsung phone shipping from its factory to being sold in some region. Then you could fudge the numbers a bit to be comparable.

However, the only thing that really matters is sales, and those are as reported in the article. iPhones get a massive boost this quarter, Droid will likely combine for a bigger yearly total.


Shipped - Not Sold
By Scott66 on 1/27/2012 1:28:59 PM , Rating: 2
Samsung hopes to have all these phones sold but these stats are for shipped units.




RE: Shipped - Not Sold
By mondo1234 on 1/27/2012 3:17:26 PM , Rating: 2
When I was at ATT in december, they had just received 70 iphones that morning and by noon had 2 left. They said they couldnt keep them in stock. I bought one of the many skyrockets in stock, though. I should have gotten a spare battery


How much money is made after the phone is sold?
By kmmatney on 1/28/2012 5:19:45 PM , Rating: 2
One key difference is Apple makes way more money after the sale. They get a piece of every App sold, along with advertisement money. I have no idea what Samsung gets, but I'm sure its not nearly as much. My kids often get iTunes gift cards to buy games for either my iPhone or iPod touch, or the family iPad (they are all linked to my account so we can share). We are constantly spending money at the App store. I've never spent a dime for anything on my wife's LG Android phone.

On a side note, I've never heard of Android having gift cards, which seems like a good idea to encourage people tp pay for Apps.




By Sureshot324 on 1/29/2012 8:13:53 PM , Rating: 2
Samsung probably makes a lot more profit on the phone itself. Apple has no factories and has to pay other companies to build the phone. In fact, I believe Samsung actually makes the Apple A5 processor in the Iphone.

Samsung can manufacture a lot of the components in their phones themselves. They make CPUs, RAM, flash memory and OLED screens. The Android OS itself is free.


Pointing out the bias
By testerguy on 1/28/12, Rating: 0
RE: Pointing out the bias
By vision33r on 1/28/12, Rating: 0
RE: Pointing out the bias
By Yongsta on 1/28/2012 4:43:53 PM , Rating: 3
I don't know where you live but in the metro area's of LA, Atlanta, and Bergen County (New Jersey) / Manhattan (places I've spent a lot of time in the past 3-4 months) I've seen a lot of SGS2 phones (restaurants, malls, etc). I saw a lot of iphones as well (but a lot were not iphone 4s instead older iphones, also it's difficult to tell apart an iphone 4 and iphone 4s).


failytech
By hexxthalion on 1/30/12, Rating: 0
"Well, we didn't have anyone in line that got shot waiting for our system." -- Nintendo of America Vice President Perrin Kaplan














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