Samsung Electronics warns of political risks as chips boost fourth-quarter profit

Tue Jan 24, 2017 4:37am EST
 
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By Hyunjoo Jin

SEOUL (Reuters) - Samsung Electronics Co Ltd (005930.KS: Quote) on Tuesday said it expects profit growth in 2017 despite challenges arising from political uncertainty, after record chip earnings glossed over the Note 7 smartphone fiasco in the fourth quarter.

The South Korean tech giant and Apple Inc (AAPL.O: Quote) rival is embroiled in an influence-peddling scandal surrounding President Park Geun-hye, with five Samsung Group executives already grilled by prosecutors and investigations ongoing.

"The uncertain business environment such as the changing political landscape in Korea and overseas poses a challenge to the execution of mid- to long-term business strategies, such as M&A and investment decisions and developing new growth engines," Samsung Electronics said in a statement.

Even so, it flagged higher earnings this year after a slow first quarter, when steeper marketing costs will eat into its bottom line as it tries to rebuild its reputation from the failure of its latest flagship phone.

The world's top manufacturer of smartphones, memory chips and flat-screen televisions is counting on the booming chip market to continue driving growth and give the mobile business breathing space to rebuild its premium lineup.

The company forecast "stable demand" in 2017 for memory chips, which hit an all-time earnings high in the October-December period.

Fourth-quarter operating profit jumped 50 percent to 9.22 trillion won ($7.93 billion), its highest in over three years and matching prior guidance of 9.2 trillion won. Earnings from the chips business soared 77 percent year-on-year to a 4.95 trillion won. Revenue were flat at 53.3 trillion won.

Analysts said the outlook for 2017 was clouded by uncertainty over the performance of new premium smartphones, succession planning within the controlling Lee family and the fallout from the graft scandal.   Continued...

 
An exchanged Samsung Electronics' Galaxy Note 7 is seen at the company's headquarters in Seoul, South Korea, October 13, 2016. REUTERS/Kim Hong-Ji/File Photo