Samsung Electronics takes hit on weak outlook

By Park Hyung-ki

Tech giant suffers equity losses on slow smartphone growth, won’s rise

  • Published : Jan 3, 2014 - 20:40
  • Updated : Jan 3, 2014 - 20:40
Samsung Electronics continued to take a beating Thursday following broader equity market losses as the tech giant’s weaker-than-expected earnings in the fourth quarter and the rapid pace of the won’s appreciation has affected investor confidence, analysts said.

Samsung Electronics has slid since Dec. 24 as foreign and institutional investors turned pessimistic toward Korea’s biggest blue chip stock on expectations that the company would post disappointing earnings in the fourth quarter of 2013.

The tech giant closed at 1,296,000 won, down almost 1 percent as the benchmark KOSPI fell 1.07 percent 1,946.14 on Friday, following overnight losses on Wall Street where the Dow Jones Industrial Average lost 0.82 percent at 16,441.35.

The KOSPI fell more than 2 percent on Thursday for the first time since the global financial crisis of 2008. This also marked the third time that the benchmark index lost over 2 percent since 1990.

The operating profit of Korea’s largest company is widely expected to have dropped 10 percent from the market forecast of over 10 trillion won ($9.5 billion) to some 9 trillion won in the fourth quarter of last year.

“This is in part due to one-time spending for bonuses, a falling foreign exchange rate and the slowing smartphone market,” said Peter Lee, an analyst at Woori Investment and Securities.

Woori Investment revised down its projections for Samsung Electronics’ operating profit from 10 trillion won to 9.27 trillion won.

“The sharp (won’s) appreciation … weak demand and pricing pressure for key components from slow smartphone shipment will lead to earnings disappointment,” BNP Paribas Securities Korea said in a report.

Samsung Electronics is projected to hand out bonuses worth around 700 billion won to its employees both at home and abroad to commemorate the 20th anniversary of Samsung Group chairman Lee Kun-hee’s so-called New Management Initiative.

Twenty years ago in Frankfurt, Germany, Lee called on the group’s diverse range of subsidiaries and affiliates, and their executives and employees to “change everything except (their) wives and children.”

By Park Hyong-ki (