Samsung's second-quarter net profit surges

Pedestrians walk past Samsung Electronics advertisement banner in Seoul, South Korea, Friday, July 25, 2008. Samsung Electronics said Friday that second-quarter net profit grew 51 percent from the same period last year, amid strong performance in flat panels and mobile phones. (AP Photo/Lee Jin-man)

SEOUL, South Korea—South Korea's Samsung Electronics said Friday that second-quarter net profit grew 51 percent compared with the same quarter last year led by its liquid crystal display and mobile phone businesses.

"We posted very strong results," Chu Woo-sik, executive vice president of investor relations, told analysts on a conference call.

Samsung earned 2.14 trillion won ($2.12 billion) in the three months ended June 30, the company said. Sales during the quarter rose 24 percent on year to a record 18.14 trillion won ($18 billion).

The result, however, failed to meet expectations, sending Samsung's stock price tumbling.

Analysts surveyed by Thomson Financial forecast that Samsung would post net profit of 2.4 trillion won ($2.4 billion) on sales of 18.5 trillion won ($18.2 billion).

Shares in Samsung, which released the earnings results less than one hour after the market opened, fell 6.2 percent to close at 576,000 won $568).

Lee Min-hee, an analyst at Dongbu Securities in Seoul, described Samsung's results as "very disappointing," citing weak performance in its mainstay computer memory chip business despite an increase in prices during the quarter.

Also contributing to the stock sell-off was investor disappointment that Samsung did not announce an anticipated share buyback, Lee said.

Samsung Electronics Co. is the world's biggest manufacturer of memory chips, liquid crystal displays and flat screen televisions. It ranks second behind Finland's Nokia Corp. in mobile phones.

Samsung said revenue at its liquid crystal display business grew 41 percent to 4.71 trillion won ($4.6 billion) from the year before, boosted by demand for televisions and laptop computers.

Lee, the analyst, said that LCD prices began to decline late in the second quarter, a trend that he said bodes ill for the company going forward.

"In the second half, Samsung's profit will decrease sharply in the LCD business," he said.

Samsung said it sold 45.7 million mobile phone handsets in the second quarter, 22 percent higher than the same period last year.

The sales figure was slightly off the 46.3 million sold in the previous three months. Chu, executive vice president of investor relations, said weaker demand in the United States and China helped pulled the number lower.

Handset sales for the first half totaled 92 million, an increase of more than 20 percent from the same period last year, Samsung said.

Chi Young-cho, senior vice president for Samsung's telecommunication business, said he was confident the company would achieve sales of 200 million handsets this year.

In televisions, Chu said that Samsung expects its market share to continue increasing from its current global No 1 position.

He said he was particularly optimistic that U.S. market share would come in at the high 20 percent range for the second quarter, calling that a "region that no one has ever treaded before."