Samsung Elec’s Q1 profit may disappoint; chip outlook positive

* Samsung to report Q1 operating profit, sales estimates
Thursday

* Profit seen at 3.2 trln won; Starmine SmartEstimates
suggests 10 pct downside surprise

* Earnings to bottom out in Q1 with solid recovery in chips

* Expectations for tablets lowered after iPad 2 launch

* Shares down 9 pct from record highs in Jan vs KOSPI’s 1
pct rise

By Miyoung Kim

SEOUL, April 7 (Reuters) – Samsung Electronics ,
the world’s top maker of memory chips and flat screens, is set
to report a third consecutive quarterly drop in earnings for
January-March in its first update since the devastating
earthquake in Japan last month.

The South Korean firm is the first major global technology
firm to release quarterly earnings estimates after the
earthquake and tsunami in Japan on March 11 raised uncertainty
about the longer-term effects of the disaster on a broad range
of manufacturers. [ID:nL3E7EE05V]

Tumbling prices of flat screens and weak demand for
televisions are seen hurting the company’s first-quarter
earnings, but it is likely to show a strong profit recovery from
the current quarter as memory chip prices rebound following the
quake in Japan.

Globally, Japan supplies more than one-third of NAND-type
flash memory chips, used in tablets and smartphones, and 14
percent of computer memory chips.

Disruptions to the global supply chain threaten to create
bottlenecks in some key components for Japanese factories and
analysts believe South Korean firms such as Samsung may benefit
as customers look for new suppliers. The company also looks set
to benefit from a recovery in the memory chip market.

For Samsung, which counts Sony Corp as its biggest
customer, raking in nearly 7 trillion won ($6.4 billion) of
sales annually, a protracted suspension of flat-screen TV
production in Japan results in lost revenue, but it also
benefits from a tightening supply of chips, for which it
competes with the likes of Japan’s Toshiba Corp .

Samsung, Asia’s most valuable technology firm with a market
value of around $142 billion, is likely to report 3.17 trillion
won in January-March operating profit on revenue of 38 trillion
won, according to a consensus of 29 analysts surveyed by Thomson
Reuters I/B/E/S.

But according to StarMine’s SmartEstimates, which places
more weight on recent forecasts by top-rated analysts, Samsung’s
operating profit may come in at 2.9 trillion won, about 10
percent below the consensus.

That would be its lowest profit since the second quarter of
2009, and down 42 percent from a year ago and 4 percent from the
preceding quarter.

Earnings at Samsung, which controls nearly 40 percent of
global dynamic random access memory (DRAM) and NAND flash memory
market, will improve from the current quarter on stable panel
prices and a rebound in the battered memory chip market,
analysts said.

Contract prices of DRAM chips have risen 3 percent since the
quake and NAND chips have risen 15 percent.

Samsung, which is also the world’s No.2 handset maker after
Nokia , is facing a tough trading outlook in its
telecoms division due to growing pricing pressure since Apple
introduced the iPad 2 with an aggressive pricing plan
last month. Samsung’s Galaxy S smartphone and Galaxy Tab tablet
compete with Apple’s iPhone and wildly popular iPad.

Apple is estimated to have sold about 1 million units of its
iPad 2 in the first weekend of its U.S. launch early last month.
By comparison, Samsung may have sold a similar number of Galaxy
Tabs in the past three months and sales growth will remain weak.
Follow-up models will be on the market in June at the earliest.

Shares in Samsung have fallen 9 percent from a record high
in late January, lagging a 1 percent rise in the wider market
during the period.
(1 = 1087.050 Korean Won)

(Editing by Vinu Pilakkott)

Samsung Elec’s Q1 profit may disappoint; chip outlook positive