Growth slowed, but strong mobile performance helped to make up for weak component demand by mobile partners

A few weeks ago the world's largest smartphone maker, South Korea's Samsung Electronics Comp., Ltd. (KRX:005930) (KRX:005935) issued a rather mixed earnings guidance for its Q1 2014 earnings, in which it predicted:
  • Sales:::::::::::::: W53T ($51.47B USD)
  • Operating Profit:: W8.4T ($8.16B USD)
The final numbers [PDF], just released on Tuesday, are a bit better -- but still paint the same general picture of a highly profitable company that is nonetheless slowing in growth.

Samsung earned:
  • Sales::::::::::::::: W53.68T ($52.13B USD)
  • Operating Profit: W8.49T ($8.24B USD)
  • Net Profit::::::::: W7.57T ($7.35B USD)
Overall, Samsung still saw record profits which beat its totals from the sluggish Q4 2013 (W7.30T / $7.09B USD) and Q1 2013 (W7.15T / $6.94B USD).

One trouble spot that hurt Samsung was in its chipmaking business.  There was a dip in mobile demand for NAND flash storage and DRAM memory for mobile devices, even in the face strong demand from cloud data centers and stabilizing PC demand.  Operating profit of the consumer electronics (CE) unit, which includes flat panel TVs and appliances, also dropped, but this was less substantial given it isn't typically a highly profitable niche for Samsung.
Samsung Galaxy S5
The Samsung Galaxy S5

Samsung's biggest gains were in the mobile devices market.  After facing slowing sales late last year, Samsung appeared to recapture momentum posting an 18 percent rise in operating proft over Q1 2013.  While mobile only accounts for roughly three-fifths (~60 percent) of Samsung's mobile revenue, it earns 75.7 percent of the profit.

The devicemaker saw strong growth in the budget and mid-range market.  It also saw good pickup of its new 8-inch and 12-inch Galaxy Tab Pro devices, which pack a premium spec.  Moving ahead to Q2 2014, things are looking good so far, with brisk sales of the perhaps underappreciated Galaxy S5, a phone which brings a major update in terms of camera technology (with Samsung's brand new ISOCELL sensor tech).

While sales of archrival Apple, Inc.'s (AAPL) iPad fell to 16.35m units, Samsung tablet sales reached new highs, moving a record 13 million units in the quarter, according to Sam Mobile.  Given Samsung's strong growth and Apple's declining iPad sales, Samsung looks poised to potentially become the first company to wrest the tablet sales crown from Apple since the iPad launched in 2010.

Samsung's sold an estimated 90m smartphones, versus 43.7m iPhones sold by Apple.  Samsung does not release precise sales data, so analysts are forced to resort to tracking and analytics to make estimates of sales, so take those numbers with a grain of salt.

Samsung is predicting that demand for mobile NAND and DRAM should jump back up in H2, and that sales of LTE-equipped devices across multiple segments will jump when users of the world's largest smartphone market -- China -- begins upgrading to the 4G wireless standard. 

OLED shipments are also expected to see gains.  Samsung already saw a healthy rise in large flat panel TV displays in Q1; up 95 percent on a year to year basis.  Samsung says a major driver of sales of flat panels came from soccer enthusiasts looking to get a crisp picture for this year's World Cup soccer championship.

World Cup
World Cup anticipation drove strong sales of large Samsung flat panel TVs.
[Image Source: Jason Mick/DailyTech LLC]

Samsung's growing cash pile currently sits at W49T ($47.6B USD).  Don't be surprised if the company makes some big moves in terms of acquisitions as that pile grows.

Source: Samsung [PDF]

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