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Samsung sees quarterly earnings at new high

Associated Press Modified: October 5, 2012 at 7:30 am •  Published: October 5, 2012
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"Smartphones are the driving force behind the record-high profit," said Lee Seung-woo, an analyst at IBK Securities.

Even as Apple reportedly reduced orders of Samsung components for its iPhone 5, analysts believe Samsung's display division likely earned more profit that a year earlier as demand for smartphones benefited sales of AMOLED, a high-resolution screen used in Galaxy smartphones.

Most brokerages said Samsung's operating profit will be at its peak in the third quarter as earnings in the fourth quarter are likely to decline with seasonally weak demand for semiconductors and increased marketing spending to compete with rival mobile phone makers. New smartphone models from Apple, Motorola, Nokia and LG Electronics are jostling for attention in the fall and winter and will call for larger handset subsidies to attract consumers.

Samsung is also trying to overturn a U.S. jury's verdict that it should pay Apple $1 billion for patent infringements. The judge's decision is expected in December and some analysts reflected the fine in forecasts for Samsung's fourth quarter earnings.

A bigger threat to Samsung's earnings in the long run will be a handset price war, analysts said. High-end smartphone sales that fueled Samsung's earnings growth since last year may not be as lucrative next year because competition with Apple could pressure margins and sales growth could slow in developed countries where smartphones are now widely used.

"The high-end smartphone market is split between Samsung and Apple, with their operating profit margins staying high at 30-50 percent at present," Nomura analyst Marcello Ahn said. "Going forward, if price competition between the two intensifies, we think smartphone margins may decline at a pace faster than our expectation."

The slow revival in the global economy as well as the persistent debt crisis in Europe could delay a revival in the personal computer industry, crippling sales of memory chips.

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Follow Youkyung Lee on Twitter at http://twitter.com/YKLeeAP