updated 11:30 pm EDT, Thu April 28, 2011
Samsung Q1 2011 shows big drop in phone sales
Samsung saw a rare downturn in its mobile business after posting results for the winter. The Korean company's phone sales sank 14 percent year over year to 70 million devices. Most of its comfort was from its greater dependence on smartphones, which went from just four percent of Samsung's phone mix to 18 percent and helped it make about $1.34 billion in operating profit from the one group.
Outlook for the spring was mixed and showed an uncharacteristic level of doubt. Samsung was launching its two most important halo devices in the season, the Galaxy S II smartphone and Galaxy Tab 10.1 tablet, and expected to "outperform" the single-digit growth of the market. The company still saw a "challenging" road ahead and singled out "tight competition" in mobile.
Samsung's profits as a whole were down 30 percent to $2.6 billion and partly showed the impact of Apple's iPad on its performance. Its memory division grew its revenue just five percent, to $5.48 billion, as slow traditional PC sales cut its ability to sell RAM. The drop would have been worse if not for an offset from mobile RAM and flash used in smartphones and tablets. Samsung uses its own memory for its phones, but Apple is still its largest customer and uses flash across nearly its entire range.
Most of the severe impact came from its display business, which lost $214.85 million and shipped eight percent fewer LCDs for TVs, computers, and other typical screens. Performance would again have been lower were it not for tablets which, along with LED-lit LCD TVs, grew by about 30 percent. Apple is widely recognized as sourcing some of its iPad display production to Samsung and would have played a significant role.
Samsung's phone shipment drop could cost it valuable share in the market. It has often been second only to Nokia in the cellphone market but could see that jeopardized in the long term. LG also saw rough performance in the winter, but Apple, HTC, and other smartphone-first designers have been growing quickly.