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Samsung sells 56m units, profit $7.4B

Friday, October 26 07:52:54

Samsung Electronics Co Ltd , the world's top phone handset maker, sold 56.3 million smartphones in the third quarter, widening its lead over rival Apple Inc, a report by research firm IDC showed. Samsung took 31.3 percent of the global smartphone market, while Apple, which sold 26.9 million iPhones, had 15.0 percent of the market in the September quarter.

South Korean technology powerhouse Samsung Electronics Co posted a fourth straight record quarterly profit - of $7.4 billion - with strong sales of its Galaxy range of phones masking sharply lower sales of memory chips. The record run, though, is likely to end in December, with profit growth slowing even more next year as TV markets stagnate and growth in high-end smartphones eases from the recent breakneck speed. Profit is expected to grow 16 percent next year, down from a forecast 73 percent this year, according to Thomson Reuters.

"The biggest concern for Samsung is that its smartphone growth momentum will slow. It'll be difficult to maintain such a high profit margin from handsets as the market gets crowded and competition will intensify," said Nam Dae-jong, an analyst at Hana Daetoo Securities. Reporting just hours after rival Apple Inc, Samsung said July-September operating profit almost doubled to 8.12 trillion won, in line with its earlier estimate. Net profit rose to 6.56 trillion won. Samsung sold 56.3 million smartphones in the third quarter, according to research firm IDC, giving it a global market share of 31.3 percent - more than double that of Apple, which said it sold 26.9 million iPhones. Apple launched its latest iPhone 5 on Sept. 21.

Samsung said it will book patent-related provisions once a U.S. court rules on its litigation with Apple. A U.S. federal jury said in August that Samsung had copied key features of the iPhone, awarding Apple $1.05 billion in damages. Apple has since asked for another $707 million, and the California court is set to rule on that in early December. "The amount of provisioning will be fixed according to the U.S. court ruling, and the costs will be set aside this quarter only if there's a ruling within the current quarter," said Robert Yi, head of Samsung's investor relations.

While Samsung outsells Apple in gadgets, the Korean group's market value is just a third of the U.S. firm's $578 billion, and investors question whether it can narrow that gap as the stellar handset business is set to lose steam and Apple, also its biggest customer, looks to spread its supplier base wider. "Samsung has a lot of strong businesses like tablets, OLED TVs and micro-processor chips that could become its next big thing and step it up to the next level," said Lee Sun-tae, analyst at NH Investment & Securities. "But these aren't fully ready to become a real earnings driver like the Galaxy."

Illustrating the might of Samsung's handset business, third-quarter profits from the mobile division more than doubled to 5.63 trillion won - 69 percent of total group profit - as sales of the Galaxy S III, introduced in late May, powered ahead of the iPhone 5 launch. Samsung is estimated to have shipped 18-20 million S IIIs in July-September. But strong sales of Apple devices - iPhones, iPads and iPods - also help the Korean group, which makes chips, micro-processors and flat screens for the popular gadgets.

Still Samsung shares trade more cheaply - at 7.5 times next year's estimated earnings versus Apple's 11.6 times - as its broader business portfolio, including thin-margin washing machines and fridges, makes it more vulnerable to weak consumer spending. Shares in Samsung have climbed 24 percent this year, easily outpacing the benchmark KOSPI's 5 percent gain, but only half the gains made by Apple. Samsung traded down 2 percent in Seoul on Friday. ( C) Reuters