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Galaxy phones drive Samsung to record profit during Apple lull

Galaxy phones drive Samsung to record profit during Apple lull

By Associated Press | Updated: 27 July 2012 09:38 IST

Samsung, the world's largest technology firm by revenue, reported another record-high quarterly profit as customers flocked to Galaxy smartphones, helping it outdo rivals even at a challenging time for the global tech industry.

Samsung Electronics Co. said Friday its net profit swelled to 5.2 trillion won ($4.5 billion) in the April-June quarter, a 48 percent jump from a year earlier. The earnings were lower than a median forecast of 5.6 trillion won in a poll of seven analysts by Yonhap Infomax, but investors still cheered the result, sending Samsung shares up 4.3 percent in Seoul.

Samsung, the world's largest maker of mobile phones, televisions and memory chips, benefited from runaway demand for its Android-powered smartphones as rivals including Apple Inc. were yet to release new models.

The robust sales of smartphones such as the company's flagship Galaxy S III helped Samsung paper over a slowdown in other consumer electronics sectors such as televisions and personal computers that has been painful for its rivals and component suppliers.

Its second quarter operating profit spiked 79 percent over a year earlier to 6.7 trillion won and its revenue rose 21 percent to 47.6 trillion won, matching Samsung's guidance released earlier this month. The operating profit, also at an all-time high, was up 15 percent from the previous quarter.

Despite nagging worries about debt-crippled Europe, analysts are expecting Samsung to achieve a record-high profit in the third quarter when Galaxy S3 sales are expected to reach a peak before Apple unveils its new iPhone, anticipated in October.

"The third quarter is expected to be marginally positive as demand for consumer electronics goods, including smartphones and tablets, remains strong and a stream of new products hit the market. Supply for display panels is also expected to increase, as TV makers prepare for the year-end holiday season," Samsung said in a statement.

In the second quarter, Samsung's mobile business contributed 63 percent of Samsung's entire operating profit by generating 4.2 trillion won profit. Analysts estimate that Samsung sold around 50 million smartphones in the second quarter, including about 6.5 million Galaxy S III phones.

Although the company does not release its mobile-phone sales figures, Samsung probably outperformed competitors in the top-end smartphone market, while having a tougher time competing with Chinese brands such as ZTE and Huawei in low-end smartphones, analysts said.

Samsung's strong result come a few days after Apple reported earnings that fell short of expectations as consumers snapped up cheaper iPhones or delayed purchase in anticipation of a new iPhone model.

Apple, which makes only one phone model, said it sold 26 million iPhones in the second quarter, up 28 percent from a year earlier. Samsung, which boasts a wide range of mobile phones with various screen sizes, designs and price ranges, extended its lead over Apple in smartphone shipments in the last period, said analyst Lee Sei-cheol at Meritz Securities.

In the first quarter, Samsung was estimated to have beat Apple in smartphone shipments by about 10 million units. In the April-June period, Samsung probably sold 23 million more smartphones than Apple, according to Lee.

The two companies, which together control more than half of the world's smartphone market, are scheduled to meet on July 30 in a San Jose court for a U.S. trial on mobile patents. An epic legal battle between the two companies started in April 2010 when Apple accused the South Korean firm of copying its iPhone and iPad designs and has expanded to about a dozen lawsuits in North America, Asia and Europe. Samsung in turn accuses Apple of violating its wireless technology patent.

Despite the legal battles, the two companies continue to have a close business relationship. Samsung is a key supplier of mobile processors for Apple's iPhone and iPad and Samsung's component divisions also make display screens and mobile chips for Apple.

Outside the mobile market, Samsung made improvements in flat-screens and TVs but semiconductor profit declined on weak global demand for personal computers.

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