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Samsung profits beat estimates thanks to Galaxy S7

Samsung Electronics performed better than expected in the first quarter, largely driven by the upbeat sales of its flagship Galaxy S7 smartphone.

The Korean tech giant said Thursday in a regulatory filing that its operating profit in the first three months this year was likely 6.6 trillion won ($5.7 billion), well above the average 5.6 trillion won estimate by local analysts. 

Pedestrians pass a Samsung Electronics retail store in Seocho-dong, southern Seoul, on Thursday. (Yonhap)
Pedestrians pass a Samsung Electronics retail store in Seocho-dong, southern Seoul, on Thursday. (Yonhap)

The figure is up more than 10 percent from a year ago. Revenue also likely rose 4 percent to about 49 trillion won, the company said.

The tech giant did not disclose full earnings details of its separate business divisions. The final results will be announced later this month.

The Galaxy S7 played a key role in restoring the company’s profits. The phone has sold more than 10 million units globally since its launch on March 11. Its sales in the key markets such as the U.S. and Europe are almost double that of its predecessor S6.

Despite praise for its upgraded design and functions, the Galaxy S6 suffered lukewarm sales. Especially the company missed strong demand for the Edge model due to supply constraints.

The latest Galaxy S7 may not be very different in overall styling but has improved key features such as the DSLR-level camera, water resistance and battery capacity. The company has also limited the number of countries where the curvy models are being launched while beefing up their production overall.

The semiconductor business division suffered price cuts of memory chips on soft global demand for electronics but its high-end products such as 3D NAND flash chips helped it maintain profitability.

“The mobile business division, led by Galaxy S7 sales, is expected to post 3.5 trillion won in operating profit, while the semiconductor division is likely to see some 2.7 trillion won in profit,” said Roh Geun-chang, an analyst at HMC Investment and Securities.

Lee Seung-woo, an analyst at IBK Investment and Securities, predicted the company’s mobile business division could see a modest drop in profit in the second quarter.

“As new phone launches are being planned by rivals, Samsung is likely to spend more on marketing in Q2. The mobile business division is estimated to post a 2.7 trillion won profit,” he said.

By Lee Ji-yoon (jylee@heraldcorp.com)
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