Samsung Electronics flags 30.5% on-year drop

Samsung Electronics on Tuesday flagged better-than-expected profits for the first quarter, with rising demand for memory chips helping offset slumping smartphone sales.
The South Korean electronics giant -- the world's top mobile producer -- flagged an operating profit of 5.9 trillion won ($5.4 billion) for the January-March period.
The estimate was down 30.5 percent from a year ago, but beat average analyst forecasts of around 5.5 trillion won, and was up 11.5 percent from the previous quarter.
Sales reached 47 trillion won, down 12.4 percent from a year ago, Samsung said in its quarterly earnings estimate.
The company has seen profits sag since late 2013 due to heightened competition in an increasingly saturated smartphone market that it had dominated for years.
Samsung has faced a double challenge from US arch-rival Apple in the high-end smartphone market and rising Chinese firms like Xiaomi in the mid- and low-end market.
Tuesday's estimate, which comes ahead of audited results to be released later in the month, did nor provide a net income figure.
- Chip sales cushion -
It also gave no breakdown of divisional earnings, but analysts attributed the better-than-expected performance to profits from high-margin chip sales which helped cushion the downturn in its overgrown mobile sector.
The company -- which produces a range of electronics products from chips to household appliances -- saw profits in its semiconductor division jump 35.7 percent on-year in the fourth quarter.
The firm's newly upgraded chipmaking plants also helped cut production costs, Song Myung-Sup, analyst at HI Investment & Securities.
"Sales hovered below analysts' expectation but profits rose, meaning the firm boosted profit by spending less rather than selling more," Song said.
South Korea's largest firm by value saw its share price rise 0.61 percent in morning trade on the Seoul stock market.
The firm's new flagship smartphone -- Galaxy S6 -- will help boost profits in the second quarter after sales begin this month, Song said.
The sixth edition of Samsung's high-end smartphone -- unveiled last month -- was well received by critics, who described it as a match for Apple's latest iPhone 6.
Nam Dae-Jong, analyst for Seoul-based Hana Daetoo Securities, said the new handset would help turn things around for Samsung after the much-criticised Galaxy S5 flopped last year.
"I estimated the second-quarter operating profit at 6.4 trillion won but plan to raise it," Nam said.
Samsung hopes the new Galaxy model will re-establish the company as the clear global smartphone market leader.
Several market trackers had Apple and Samsung tied in worldwide smartphone sales in the fourth quarter of 2014, while at least one suggested Apple had regained the throne it lost to Samsung back in 2011.
Source: AFP