Samsung surges on smartphones

Things can’t get much better than this for Samsung’s shareholders.

Shares in Samsung Electronics, the world’s largest technology company by sales, hit a record high of Won1.08m ($960m) on Thursday, and closed up nearly 7 per cent at Won1.074m, despite cooling demand for technology products amid the global economic slowdown.

Much of the jump in shareprice was due to heavy foreign buying, topping its previous record of Won1.014m hit in late January. The shares have surged about 40 per cent over the past three months, while Apple’s shares have fallen 4 per cent and Sony’s have dropped 18 per cent. Samsung is now valued at $142bn, more than the combined value of Sony, Nokia, Toshiba and Panasonic, although it is still less than half of Apple’s $347bn.

Behind the stock’s strong performance are Samsung’s robust smartphone sales. The South Korean company, which was a minor player in the booming smartphone market only a year ago, has overtaken Apple to become the world’s largest seller of smartphones as shipments surged 40 per cent in the third quarter. Samsung shipped 27.8m smartphones in the last quarter, taking 23.8 per cent of the market, compared with Apple’s 17.1m shipments and 14.6 per cent market share.

Analysts still see some upside potential for Samsung’s shares as smartphone sales boost demand for Samsung’s components such as mobile processing chips and OLED (organic light-emitting diode) screens. Kim Young-chan at Shinhan Investment & Securities on Thursday increased Samsung’s target price from Won1.1m to Won1.3m, expecting the company to further strengthen its smartphone offering.

“Samsung is increasing its hegemony in the smartphone market while traditional mobile players such as RIM and Nokia fall behind and Apple gradually loses its innovativeness with its relatively weak product portfolio focused on only high-end products,” he said in a report. “Samsung now has a business structure through which it can generate most stable profits, thanks to the strong synergy between its components and sets.”

Samsung posted an operating profit of Won4.25tn ($3.8bn) in the third quarter, topping market estimates. Kim expects the company’s operating profit to increase further to Won4.68tn in the current quarter and forecasts its 2012 operating profit to increase 27.3 per cent to Won19.8tn ($17.6bn).

Sentiment on the stock improved further after Samsung won its first legal victory against Apple on Wednesday by overturning a sales ban in Australia. Samsung will be allowed to sell its latest Galaxy tablet computers in Australia during the crucial Christmas shopping season.

Clearly, the legal wrangling with Apple over technology patents has not dented Samsung’s sales of mobile devices. Samsung is now trying to differentiate its smartphone hardware, using its advanced 3G and display technologies, but analysts say it needs to secure software competitiveness to stay ahead in the long term.

As Park Kang-ho at Daishin Securities put it: “It still faces challenges in boosting the competitiveness of its own operating system Bada to reduce its reliance on Google’s Android as well as in cementing its position in the fast-growing tablet market”

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