Samsung posts record profits on Galaxy phone sales

Affordable smartphones key to Samsung's growth

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Samsung Electronics has reported record profits in the three months to September, led by strong sales of its Galaxy range of smartphones.

Net profit was 6.5tn won ($5.9bn; £3.7bn), up 91% from a year earlier.

The South Korean phonemaker was also boosted by strong demand at its display panel unit.

The results come after quarterly profits from Apple - its biggest rival in phones and tablets - disappointed some investors.

While Samsung has enjoyed tremendous success with its Galaxy range of smartphones, other manufacturers have been releasing new models.

But not all mobile phone firms are doing well as competition gets more aggressive.

Records broken

Samsung expects market competition to intensify but "we will do our best to sustain our earnings momentum throughout the fourth quarter by implementing strategies we have developed for our businesses", said Robert Yi, head of investor relations.

Start Quote

Samsung's Galaxy Tab tablet PCs are not sexy enough to oversell Apple's iPad”

End Quote Lee Sun-Tae Analyst

The firm said its flagship Galaxy SIII smartphone has been a key driver in raising profit margins.

"The business environment remained difficult with global economic uncertainties persisting amid the fiscal concerns in the US and Europe.

"However, we continued to break our quarterly profit records," Mr Yi added.

The display panels unit at the firm had revenues of 8.46tn won, up 19% from the previous year. The unit is now profitable.

And the firm expects a "flurry of new mobile devices hitting the market" to boost sales of application processors and image sensors it makes that power smartphones and tablet PCs.

'Not sexy enough?'

Analysts said that increased competition means that firms may have to lower their prices to attract buyers as well as spend more on their marketing campaigns - which will dent their profit margins.

Samsung, which derives the bulk of its earnings from smartphone sales, is likely to feel the affect of any such moves.

However, increased competition and its legal tussles with Apple have raised concerns over its future performance.

"There are concerns that Samsung's earnings would peak this year," said Lee Sun-Tae an analyst at NH Investment & Securities.

"It will take time for Samsung to narrow the gap with Apple in the tablet market. Samsung's Galaxy Tab tablet PCs are not sexy enough to oversell Apple's iPad."

Legal tussles

Samsung's success in the smartphone and tablet PC sectors has been accompanied by legal tussles with its biggest rival, Apple.

The two firms have filed legal cases against each other in more than 10 countries, each accusing the other of violating its patents.

Samsung smart phone Samsung is the world's biggest maker of mobile phones

Earlier this year, a court in the US ruled that Samsung had violated some of Apple's patents and awarded the US firm $1.05bn in damages.

Samsung is appealing against the ruling.

On Wednesday, in a preliminary ruling, a judge at the US International Trade Commission, which has the power to block import of products into the US, said that Samsung had infringed four of Apple's intellectual property patents.

Meanwhile, Samsung has tasted some success in countries such as the UK and Netherlands.

Analysts said that while the cases seemed to have had little impact on Samsung's growth, it has raised concerns about how they may affect it in the future.

"Uncertainty remains about its patent lawsuits with Apple, which weighs on its shares," said Eon Nam-Joong, of Consus Asset Management.

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