January 7, 2011 / 12:42 AM / in 7 years

RPT-UPDATE 4-Samsung profit set to recover on gadgets after Q4 dip

* Expects Q4 profit at 3.0 trln won vs 3.4 trln won consensus

* Sees Q4 sales at 41.0 trln won vs 41.2 trln won consensus

* Smartphones, tablet PCs cushion blow - analysts

* Samsung seen as key rival to Apple - analysts

* Samsung shares dip 1 pct after hitting record this week (Repeats to fix headline tag) (Adds more comment from fund managers)

By Hyunjoo Jin

SEOUL, Jan 7 (Reuters) - Samsung Electronics’ weakest profit estimate in six quarters could be a short-term blip with an expected recovery in the company’s mainstay memory chip business and surging smartphone sales fuelling earnings growth.

The world’s top maker of memory chips and flat screens predicted its October-December profits would be below market expectations. Analysts blamed sluggish demand for computers and flat-screen TVs for steep falls in chip and panel prices.

After a weak start, Samsung is emerging as a credible challenger to Apple with its Galaxy S high-end smartphone, powered by Google’s Android software. Samsung’s Galaxy Tab is also seen by some analysts as the strongest rival to Apple’s iPad tablet.

“Samsung has successfully expanded into the smartphone and tablet PC segments. Samsung is a totally different story compared to pure chip and display plays. Its diversified portfolio creates stable profits in the cyclical businesses,” said Ahn Young-hoe, a fund manager at KTB Asset Management.

Samsung, which has become a global brand in the space of 10 years, now boasts a market value of $136 billion, equal to the combined value of Sony Corp , Nokia , Toshiba Corp and Panasonic Corp .

Samsung shares have jumped 25 percent since November and struck a record high on Monday on expectations of a recovery in profits. Out of 46 analysts tracking Samsung, only two have a hold rating, while the others have a buy or strong buy, showcasing the market’s bullish expectations on the company.

Samsung, the first major global technology firm to flag preliminary December quarter results, has held on to its No.1 slot in TVs against Sony and Panasonic and is performing strongly over U.S. chip rival Micron Technology .

“...Only Samsung can rival Apple in tablets and smartphones. We think these segments will continue to grow. Earnings at Samsung hit the bottom in the fourth quarter,” said Kim Young-Chan, analyst at Shinhan Investment Corp.

“LCD division will turn around at the end of the first quarter and the TV division will see improved margins led by premium products.”

Tablets are in focus during the U.S. Consumer Electronics Show that kicked off on Thursday in Las Vegas, with Research In Motion, LG Electronics , Motorola and other players introducing their new tablet devices.

Sony, considered a laggard in some areas of high-end consumer electronics, surprised some analysts by not unveiling a tablet rival to Apple’s iPad. It still said it aims to emerge as the world’s second largest maker of tablet devices behind Apple by 2012. [ID:nN06131330]

Global tablet sales are expected to surge to 54.8 million units in 2011, from 19.5 million last year, according to research firm Gartner, as handset vendors and PC makers flock to the fast-growing segment following the blockbuster sales of Apple’s iPad. [ID:nLDE69E0IT]

EARNINGS AT BOTTOM?

Samsung, which has a tradition of beating even the most bullish estimates, expects its operating profit to come in at 3.0 trillion won ($2.67 billion) for October-December. It provided a range of 2.8 trillion won to 3.2 trillion won, lower than a consensus forecast of 3.4 trillion won polled by Thomson Reuters I/B/E/S.

That would be down from 4.9 trillion won for the preceding quarter and versus 3.4 trillion won a year ago.

Samsung only provided headline numbers for the quarter on Friday and is due to report detailed quarterly results in late January.

Analysts said Samsung’s TV division may have also been hit hard by heavy marketing costs and price competition as TV makers are grappling with excess inventory amid slowing sales.

“Samsung’s LCD (liquid crystal display) and semiconductor business is the disappointing area in last quarter, however as the economies in the United States and Europe continue to recover, the company should also benefit, as well as its home appliance sales. Its smartphone sales have done well,” said Chiang, Yi-chien, fund manager at Prudential Financial’s fund unit in Taipei, which owns Samsung shares.

“But as the whole industry is facing more competition, it will be a challenge for Samsung this year to achieve growth in profitability in this business. But all in all, Samsung should be able to sustain its bottomline this year.”

Samsung’s shares have far outpaced a 10 percent gain in the broader market since November and versus a rise of about 5 percent in the FTSE global technology sector index . (Additional reporting by SEOUL bureau and Clare Jim in TAIPEI; Editing by Anshuman Daga)

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