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Analysts cut Samsung's Q4 estimate on one-off factors

2014/01/03 14:43

SEOUL, Jan. 3 (Yonhap) -- Samsung Electronics Co., the world's No. 1 maker of smartphones, is expected to post relatively dull earnings for the fourth quarter of fiscal 2013 on one-off factors such as massive employee bonuses, analysts said Friday.

Analysts here predicted the South Korean tech giant's operating profit to reach around 9 trillion won (US$8.5 billion) for the October-December period, below the psychologically significant 10 trillion won.

South Korea's 25 brokerage houses, gauged earlier by market researcher FnGuide, had forecast the figure at 10.5 trillion won.

The downgrade rally came as the electronic arm of Samsung Group gave out massive bonuses to its employees to commemorate the 20th anniversary of its so-called New Management Initiative, the key business strategy of its parent company.

Woori Investment & Securities Co. said Samsung's cumulative special bonuses, paid to employees around the globe in the fourth quarter, are believed to be around 700 billion won, above the market estimate of 400 billion won.

Accordingly, a number of brokerages here slashed the fourth-quarter outlook for Samsung Electronics, with Sinhan Investment Corp. suggesting an operating profit of 9.5 trillion won and with Woori Investment and KDB Daewoo Securities Co. projecting 9.3 trillion won.

BNP Paribas also lowered the estimate, down by some 14 percent on-quarter in the October-December period to the 8 trillion won level, citing the one-off expenditure.

Analysts also took a reserved approach, fearing dent to the tech giant's earnings from the slowing demand for Samsung's Galaxy line-up amid the intensified patent battle with its rival Apple Inc.

"Samsung's mobile business suffered a decline in profitability due to the increase in marketing costs and the rise in demand for lower-end smartphones," said Kim Young-chan, a researcher at Shinhan Investment.

The prolonged patent battle with the world's No. 2 smartphone maker also emerged as a potential major drag on the South Korean tech giant's earnings down the road, he added.

Samsung had filed a lawsuit against the U.S. rival in March last year in Seoul, claiming that Apple's devices violated three of its patents, including a text messaging display technology.

South Korea's Seoul Central District Court, however, ruled in favor of Apple in December, concluding that two of the three patented technologies by Samsung did not show technical "advancement." Similar lawsuits are pending in courts across the world.

The protracted gain of the Korean won against the U.S. dollar also dealt a harsh blow to Samsung's price competitiveness, as a relatively stronger won inflicts foreign-exchange losses on local exporters, making South Korean goods more expensive overseas, analysts added.