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Samsung Sees Record Q4 Profits, Boosted by Mobile
By Adam Dickter
Posted: January 25, 2013 1:28pm PST

"We did our best this quarter to achieve strong earnings based on a strategic focus on differentiated and high value-added products, as well as our technological competitiveness," said Robert Yi, Samsung senior vice president. Samsung reported record profits in the fourth quarter, driven largely by mobile products like the Galaxy S III.

For Samsung Electronics, success seems to come in all shapes and sizes, as the company's multi-structured approach to consumer taste yields big profits. In its fourth-quarter consolidated earnings report released Friday, the South Korean technology giant showed a 75.6 increase in profit over the same period of last year, boosted heavily by smartphone sales, with a record 7.04 trillion won net profit ($6.6 billion at current exchange rates). That represents almost a third of 2012's total profit.

Galaxy of Profit

Smartphone revenues amounted to about $5 billion, more than double last year's fourth quarter, with the flagship smartphone Galaxy S III and Galaxy Note II "phablet" leading the charge.

"Despite uncertainties in Europe and concerns over the U.S. fiscal cliff creating a difficult business environment, we did our best this quarter to achieve strong earnings based on a strategic focus on differentiated and high value-added products, as well as our technological competitiveness," said Robert Yi, Samsung senior vice president and head of investor relations.

He cautioned that in 2013, the company's component business should see a slow recovery due to reduced spending on manufacturing. Warnings that a stronger won may cut operating profit led to a drop in Seoul trading to a two-month low, Bloomberg news said.

Samsung said its lineup of LED TVs contributed to profits but gave no figure in its statement. Appliance sales, on the other hand, slumped because of the weak global economy, with the exception being high-end refrigerators and washers in the U.S. and Europe.

The earnings presented a brighter picture than that of archrival Apple, which also showed record profits but showed smartphone sales that were lower than Wall Street's high expectations, fueling speculation that its market share is starting to slip amid stiffer competition from devices with a bigger variety of features. Apple slightly increased its display with the iPhone 5 from 3.5 inches to 4 inches, at a time when some Android-based phones by Samsung and others are routinely larger.

Non-Frivolous Differentiation

"What we're seeing is a common issue in products without a lot of room to evolve," Charles King, principal analyst at Pund-IT, told us. "When you've gone about as far as you can -- given the limitations of available technology -- you focus instead on form factor issues. It isn't quite as frivolous as the increasingly large fins that graced Cadillacs and other U.S. cars in the '50s and '60s. Bigger screens -- especially in smart phones -- measurably impact customer experience, especially for multimedia apps and gaming."

Reports emerged last week that Apple may shift its strategy to a range of screen-size devices, with an "iPhone Math" in the works with a 4.8-inch screen. This kind of "me-tooism," as also seen with Apple's capitulation in making an iPad mini, "may also reflect essential changes in customer taste," King said.

Research firm Strategy Analytics said in a report issued Friday that Samsung shipped 213 million smartphones worldwide in 2012, the largest number ever shipped by a vendor in a single year. Apple held second place, with 135.8 million, while Nokia retained third place with 35 million. All others combined amounted to 316 million.

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