

Samsung posts $7.4 billion profit as handsets mask weak chip sales - ari_elle
http://www.reuters.com/article/2012/10/25/us-samsung-earnings-idUSBRE89O1RO20121025

======
blinkingled
Whoa - For a moment I was convinced $7.4B was revenue. That's profit which is
impressive to say the least.

Next somewhat unexpectedly 2/3rd of the profits are from mobile division -
Smartphone sales mainly. Wonder if all the parts Samsung supplies to Apple
make them so little profit (they sell displays, DRAM, Flash and make Apple's
SoC for them) that they could just stop doing that and their bottomline would
be hardly touched.

I am sure I am misreading something here - or may be margins are just razor
thin in everything Samsung sells to Apple.

~~~
nandemo
Note that Samsung is a huge conglomerate. I suppose this is news is posted
here because some many people on HN tend to view Samsung is an "Apple rival"
(and for some odd reason a lot of people "root" for tech companies), but
Samsung is more like a Korean version of what General Electric used to be.

According to Wikipedia, Samsung's revenue in 2011 was U$247 billion. That's
about the nominal GDP of Hong Kong or Israel.

~~~
kitsune_
Amen, when the tech press talks about Samsung it usually talks about Samsung
Electronics. I find it somewhat aggravating.

Samsung builds ships, skyscrapers, it owns departments stores and provides
life insurances. The conglomerate is a complex maze of interconnected
companies. The ownership structure is very complicated. There is an excellent
article about it in The Economist.

~~~
lostlogin
I've read about their opaque structure before, and the relationship between
big business and the South Korean government. Dark and murky. It's rather
fascinating. Wish I could remember the article source.

------
stephenjudkins
By comparison, Apple just posted $8.22 billion of net income.
[[http://www.nytimes.com/2012/10/26/technology/apple-
profits-r...](http://www.nytimes.com/2012/10/26/technology/apple-profits-
rise-24-on-iphone-5-sales.html)].

Approximately $5.1B of Samsung's profits came from their phones; this is
despite Samsung being an extremely diversified company. I cannot find what
proportion of Apple's profits come from sales of iPhone and iPads; they do,
however, make up a majority of their revenue.

~~~
ari_elle
As you stated,

 _"I cannot find what proportion of Apple's profits come from sales of iPhone
and iPads; they do [...] make up a majority of their revenue."_

it's imo very safe to assume that.

They sold an astonishing 26.9 million iPhones in Q3, 58 percent growth
compared 2011. Also 14.0 million iPads (Q3), 26 percent growth.

With a 4.9 million Macs sold (only 1 percent unit increase) and a 19 percent
decline with Ipods, i guess it's safe to assume that most of their revenue
(especially additional revenue compared to last Q3 earnings) comes from
Iphones/Ipads.

All numbers from official press release:

[http://www.apple.com/pr/library/2012/10/25Apple-Reports-
Four...](http://www.apple.com/pr/library/2012/10/25Apple-Reports-Fourth-
Quarter-Results.html)

Anyway: Good job Samsung :)

~~~
clarky07
they make roughly half their profit from iPhone. iPad I think may be around a
quarter now.

------
confluence
> _Earnings from the chip division, where Samsung competes against Toshiba
> Corp and SK Hynix Inc, dropped 28 percent to 1.15 trillion won as prices of
> dynamic random access memory (DRAM) chips sagged, though a recovery in NAND
> flash chips, widely used in mobile devices, helped offset the weakness.

The company said it expected DRAM oversupply to run on into the current
quarter, but sees a tight NAND flash memory market._

Intel had the same problem. They switched markets from commodity to monopoly.
They're still around.

I've noticed Samsung's ability to crush it since about March of last year and
have been long Korean tech dominated ETFs to hedge my Apple stock - which I
recently sold and subsequently shorted. Samsung is Dell with profits. It in
combination with Android will destroy the iOS ecosystem.

Here's to profits with openness. May the Microsoft strategy once again
prevail.

Apple was good while it lasted and it brought a lot of great tech forward by a
few years. But they're out of screens to attack - just like Microsoft is
really out of operating systems to attack. Disclaimer: I'm long Samsung, and
will be long Google once more if the price drops further.

You never bet against Linux in the long term. Just like you never bet against
capitalism or democracy.

Linux always wins.

~~~
clarky07
While I think Samsung is a great stock and company, it's not like Apple is
failing miserably. Shorting it here seems like a scary idea. They have 120
billion in the bank with a PE < 15\. ex cash it's 10 or 11.

~~~
padobson
I'd agree with you if Apple had said they were going to use all that cash to
force content providers to let them change TV.

But seeing as Apple TV isn't trying anything ambitious, and they've decided to
pay all that cash back to investors instead of disrupting new markets, and
Samsung is clearly killing it as their chief rival, I also hold the OP's
opinion that Apple has peaked.

~~~
clarky07
They aren't paying anywhere close to all that cash back to investors. They are
paying roughly 1/4 of the new money they make each quarter. Total cash still
went up last quarter by several billion. Apple TV may or may not be a myth,
but they haven't announced anything yet so I don't think you can say whether
or not it is ambitious.

Samsung is killing it, but Apple still made more money this quarter (and every
recent quarter). They are a 6-700 billion dollar company that is growing >
20%. With a PE of 11, how do you short that?

~~~
padobson
The last two years, Apple has done things that no company has done in the
history of capitalism. It really is remarkable, and should be taught in
history books.

To say that they've peaked is not to say that they're going to fail or flop or
anything like this, but I don't see them getting to a $1Trillion market cap
without a major disruption in television. To say that they've peaked and that
their stock is unlikely to go up is not necessarily a critique of Apple, but
an acknowledgement of gravity.

~~~
clarky07
To me peaked seems to imply that they will be going down quickly, and I just
don't see that happening anytime soon. Look at the amount of money they've
been making, and then look at their market share. Macs, it's tiny. iPhones,
where they make 50% of their profit, it's half of samsung. Yes they dominate
in tablets, but that is a rapidly growing market. They can lose share and
still grow there.

It seems to me that the way the phone business is they don't really need to do
anything special at all and they will make about 50 billion profit next year.
That makes them undervalued in my opinion, just based on the fundamentals.

Now, do I think they are going to a trillion market cap in 3 months, not at
all. But I think at this level they are a much better buy than sell. If only
for the dividend that is likely to be growing by large amounts. all this being
said i agree that samsung is also a buy. They are selling huge amounts of
phones, and they are also selling the components for lots of others (though i
think i just read they stopped selling screens to apple maybe?)

------
loceng
Wow.. Good job.

------
ameyamk
This is why I am bullish on Google. I think motorola with Google will
eventually figure it out and will take half of those $5B+ mobile profits from
Samsung.

~~~
lostlogin
I suggest reading Asymco before backing that idea with cash. His stats on cell
phone makers which are down on their luck is sobering. My short (and hopefully
not too inaccurate summary) is that once a cell phone maker stops making
money, they never recover.

Edit for spelling

~~~
ZeroGravitas
Personally I'm glad I didn't put any money on Asymco's predictions back when
he thought Modular(i.e. Android + WinPhone combined) was going to be limited
to 30% of the market (last time I checked Android was about 70% on it's own)
and that the companies with the right idea where Interdependant (i.e. RIM and
Nokia). Ouch.

What do you have to believe for an Android dominated future? (from end of
2010):

[http://www.asymco.com/2010/11/03/what-do-you-have-to-
believe...](http://www.asymco.com/2010/11/03/what-do-you-have-to-believe-for-
an-android-dominated-future/)

quote:

"So what’s the bottom line?

For an Android dominant future, several conditions must be met; one will need
to believe all of these to be true:

* The addressable market for modular solutions will have to grow much faster than that of inter-dependent vendors. [The chart shows in-line growth--again due to the overall growth of the market. The green guys above won't just roll over.]

* The split of licenses between Android and Windows Phone within the addressable market must favor Android. [Again, this is unlikely as "politics" will interfere. (I won't even touch IP issues.)]

* The current modular vendors will not become inter-dependent or the current inter-dependent vendors will become modular. [Now why would they tear themselves apart if they are growing?]

* The profitability of Android vendors must be high enough to make modularity sustainable [more about this later.]"

So to believe in an Android dominated future, you'd need to believe 4 things,
that he's sure won't happen, that all turned out to happen, and to an extreme
degree (e.g. Android vs Winphone market share which he predicts at roughly
10/20 percentage points is more like 70/5, Samsung is clearly making Android
profitable, Nokia shopped itself to both Android and Winphone and no-one would
be surprised if RIM did likewise, etc. etc.). Does this mean he believes in an
Android dominated future now? Somehow I doubt it.

~~~
lostlogin
All good points. Clearly you have been reading him for longer than I. Perhaps
his long term predictions are worse than I realised.

