Samsung pips Intel as it posts record profit, splits stocks

Bloomberg

Samsung Electronics Co. is on a roll. The maker of smartphones, screens and consumer electronics reported record quarterly profit and disclosed numbers showing that it’s chip business pulls in more revenue than Intel Corp.
The Suwon, South Korea-based company took the opportunity to unveil a 50-to-1 stock split, which sent its shares surging. The earnings report for the last three months of 2017 draws the curtain on an eventful year, during which heir apparent Lee Jae-yong was jailed for corruption in connection with a national influence-peddling scandal. Even so, South Korea’s most prominent company continues to churn out profits, as demand for memory chips, displays and semiconductors help to make up for less money earned abroad due to the country’s rising currency. With the stock split, individual investors will find it easier to buy Samsung shares, according to Greg Roh, an analyst at HMC Investment Securities Co.
“There’ve been calls for a stock split in the market to increase liquidity and Samsung’s embracing them now,” Roh said.
Samsung shares jumped as much as 8.7 percent after the board approved the share plan and a report showed that net income rose to a record $11.2 billion in the three months ended in December. Samsung is already the country’s biggest stock, accounting for one-fifth of its main stock exchange. The shares closed little changed at 2,495,000 won on Wednesday.
Still, attention next week will turn to Lee, who denies any wrongdoing and will receive a ruling on his appeal of a five-year sentence.“Regardless of where Lee Jae-yong is, the top priority for Samsung is keep up profit in the face of uncertainties from the strengthening won to the growing specter of protectionism,” Claire Kim, an analyst at Daishin Securities, said before the results.
New shares will probably start trading in mid-May following a shareholder meeting, Samsung said. The stock reached record highs in 2017 before sliding on concerns of slowing demand for memory chips, the largest source of income for the company that also supplies organic light-emitting diode screens for Apple Inc.’s most expensive phone.
Operating profit for the quarter was 15.15 trillion won on sales of 66 trillion won, Samsung said, confirming preliminary numbers released earlier this month. The company said a higher Korean currency reduced profit by 660 billion won, and that it anticipates a “negative impact” from the fluctuations in the won and lower seasonal demand in the first three months of the year.
Operating profit from the chip division more than doubled from a year earlier to 10.9 trillion won. Its 2017 chip sales of $69 billion pushes the company past Intel, which reported 6 percent growth to $63 billion. Samsung dominates in memory chips while Intel supplies 90 percent of the world’s computer processors.
Intel recently got back into memory chips, now crucial parts of smartphones, which easily outsell personal computers. Spot prices for 4 GB DRAM chips surged 92 percent in 2017, according to data from InSpectrum Tech Inc. Memory chips are also finding their way into a range of new devices such as cars, drones and other machines controlled by artificial intelligence.
Samsung’s mobile division had profit of 2.42 trillion won, selling 86 million phones in the fourth quarter. While Samsung remains the world’s biggest smartphone maker, it has fallen out of the top 5 in China and is being challenged by Xiaomi Corp. in India, the two most populous nations. Samsung plans to debut its new flagship smartphone, the Galaxy S9, next month, giving the iPhone X a new challenger. The South Korean company competes with Apple for high-end users while also trying to fend off challenges from Huawei, Oppo and other Chinese rivals for inexpensive devices.