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Samsung Posts First Ever Quarterly Loss

Posted on: Friday, 23 January 2009, 15:46 CST

Samsung Electronics posted its first-ever quarterly loss on Friday as its memory chip and display units were hit with plunging prices and waning consumer demand amid a global economic slump.

The Suwon, South Korea-based company said it lost 14.4 million in the three months ended Dec. 31, compared with a $2.21 trillion net profit a year earlier.

This quarter’s loss, Samsung's first since it began reporting quarterly results in 2000, highlights the challenges confronting electronics companies throughout the world as major economies face a global recession.

The company has struggled with declining prices for chips and flat screen displays, along with dwindling consumer demand.  The downturn has also hit other Asian electronics manufacturers, including Sony Corp., which reported its first annual loss in 14 years on Thursday. 

Indeed, South Korea's LG Electronics Inc. reported a record quarterly net loss, while Japan's Panasonic Corp. said it would shut down its unprofitable businesses and cut roughly $1.5 billion from its planned investment in two new flat-screen TV plants.

In a conference call with analysts, Samsung’s Vice President of investor relations, Robert Yi, said the company had been hit hard by the global recession.

"Our company could not escape the rapid decline in the global economy," he said.

On an operating basis, Samsung posted an October-December loss of $682 million, its first loss ever and far greater than the $230 billion loss forecasted by analysts. Operating earnings are viewed as a direct indication of core business performance, while net profit or loss takes taxes, dividends, asset sales and other items into account.

"The global economic slowdown had an adverse effect on consumer purchases of electronics goods in the fourth quarter, traditionally a strong period for electronics companies," the company said in its report.

Fourth quarter sales were $13.3 billion, up from $12.6 billion the previous year but missing analyst’s expectations of $14.4 billion.

Not all of Samsung’s news was bad, however.  The company reported record mobile phone sales rose during the quarter, despite a 5 percent contraction in the global handset market.  The world's No. 2 mobile phone maker sold about 200 million handsets in 2008, a 22 percent increase from 2007.

Chi Young-cho, Samsung’s senior vice president of strategic planning, told the conference call the handset market in developed economies such as Europe and the United States will decline by 10 percent or more in 2009.  Emerging markets are expected to slow, he added.

"We expect 2009 to be quite challenging compared to any previous years.”

Last week, Samsung announced a major restructuring, saying it would consolidate its operations into two divisions.  This week the company announced the redeployment of more than 80 percent of the 1,400 employees at its Seoul headquarters, and said it had replaced a majority of the executives at its overseas regional headquarters.

Samsung said its net profit dropped 25.6 percent during 2008, to $3.8 billion, from the year before, while its sales rose 15.5 percent to $52.5 billion.

Shares of Samsung’s stock were down 4.1 percent, closing at 442,000 won.

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Source: redOrbit Staff & Wire Reports

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