Samsung's profit beats forecast thanks to early phone debut
Samsung Electronics reported Thursday a better-than-expected quarterly profit as an early debut of its flagship Galaxy smartphones boosted sales of high-end phones despite flat growth in the overall smartphone market.
The South Korean company said it earned 5.3 trillion won ($4.6 billion) for its January-March quarter, up 14 percent from 4.6 trillion won a year earlier.
That's above the average forecast of analysts polled by FactSet of 4.7 trillion won.
Sales rose 6 percent to 49.8 trillion won ($43.4 billion) from a year ago while operating profit was up 12 percent to 6.7 trillion won, broadly in line with the company's earnings guidance earlier this month.
Samsung Electronics launched the latest versions of its flagship Galaxy smartphones on March 11, about a month earlier than the new phone launch last year. The updated models sported new features such as an expandable storage space and a water resistant function but their prices were cheaper than the previous versions.
Analysts said the early debut and Samsung's pricing strategy helped boost sales of the premium phones during the quarter amid softer demand for the iPhone 6S and the absence of new products from competitors. Counterpoint Technology Market Research estimated that Samsung sold 10 million Galaxy S7 series during the month of March, up 25 percent from a year ago.
As a result, Samsung's mobile business posted its biggest profit in nearly two years, raking up 3.9 trillion won ($3.4 billion) in operating profit. That is 42 percent higher than a year ago and the phone division's biggest quarterly profit in seven quarters.
The company also benefited from streamlining the type of cheap smartphones it sold in emerging markets, which helped save the cost of components.
During the first three months of this year, the South Korean company's overall smartphone sales declined slightly, but not as badly as Apple, according to the latest industry data. Samsung's shipment dropped 1 percent from a year earlier, while Apple's sales sank 16 percent, according to IDC, a market research firm.
Analysts are divided whether the strong sales of the Galaxy S7 series would continue during the second quarter as demand for new smartphones in developed markets slows.
But Samsung sounds confident. It forecast its flagship smartphone sales will grow from last year even as the overall industry stays flat.
The company was upbeat about the second quarter, saying that it expected steady earnings in the mobile and semiconductor businesses and an improvement in the consumer electronics and display businesses.