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July 15, 2005 4:27 am

Samsung Electronics reports tumbling profits

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Profits at Samsung Electronics, Asia’s most valuable technology company, tumbled by 46 per cent in the second quarter, dragged down by falling memory chip and flat-panel display prices.

But the South Korean company said it expected prices of dynamic random access memory (D-ram) chips to firm and mobile phone sales to gather pace in the second half of the year.

Samsung Electronics on Friday said it earned Won1,690bn (US$1.63bn) during the three months to June 30, down from Won3,130bn a year earlier, on sales that were 9.3 per cent lower at Won13,600bn.

The company is understood to be expecting full-year profits of US$7bn-8bn, down sharply from last year’s US$10.6bn, and Friday’s results were broadly in line with analysts' forecasts.

“Despite the challenging business environment and depressed market conditions, sales remained at similar levels from the prior quarter and operating profit figures met the market's expectation, demonstrating the inherent strength and competitiveness of Samsung's business model,” said Chu Woo-sik, head of investor relations.

“With demand for IT products expected to return and steady growth in our D-ram, NAND Flash, LCD and mobile phone businesses, Samsung Electronics anticipates improvements in both sales and operating profits in the second half of 2005.”

Shares in Samsung Electronics – the largest maker of flat screens, the second-biggest chipmaker and number three mobile phone producer in the world – were trading 0.6 per cent lower at Won544,000 in early trading on Friday.

The company reported that revenues from its semiconductor business were 9 per cent lower at Won4,200 in the second quarter, while income from the telecommunications division fell 10 per cent to Won4,500bn.

Mobile phone sales, at 24.4m units, were up 8 per cent from a year earlier but flat compared to the first quarter. It aims to sell 100m phones this year - or 300,000 a day.

On Thursday, Moody’s ratings agency assigned an “A1” rating to Samsung Electronics’s long-term foreign currency debt, two levels higher than South Korea’s sovereign country rating. That put the company on the same footing as rivals Intel, Nokia, IBM and Sony.

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