updated 08:35 am EDT, Thu April 7, 2011
Samsung profit to drop 42pc in early 2011
Samsung warned Thursday that its operating profit for winter 2011 would drop at least 42 percent compared to a year ago. It expected to make between $2.48 billion to $2.84 billion, a steep fall off from the roughly $4.06 billion it made at the same point in 2010. Officials didn't explain the drop and said more would have to wait for its full results in late April.
Dongbu Securities analyst Lee Min-hee, however, blamed the iPad as a core factor. Samsung is likely to have faced a slump in LCD sales, both because of low TV sales but also through a drop in notebook sales as end users switched to tablets.
More directly, there was "severe price competition" with Apple, Lee said. Along with repeated cuts to the Galaxy Tab's price at carriers, the company had to price the Galaxy Tab 8.9 and 10.1 at or below Apple's iPad 2 pricing. It had planned to charge a premium for the 10.1 under the flawed assumption that Apple would have to charge more for the iPad 2's dual-core processor and cameras.
The analyst expected Samsung to bounce back in the spring, in part because the Japanese earthquake was triggering higher prices for memory and seeing companies stock up on LCDs in the event supply ran short too quickly.