Samsung Gives Sony A Taste Of Whats To Come

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Samsung is fast eclipsing Sony as the top TV brand in the world, with the once mighty Sony now pushed into third place in Australia, behind both Samsung and LG two Korean Companies who last week reported record profits and increased market share in the flat panel TV market.

Samsung is fast eclipsing Sony as the top TV brand in the world, with the once mighty Sony now pushed into third place in Australia, behind both Samsung and LG two Korean Companies who last week reported record profits.  

In the second quarter ended June 30, Samsung net profit rose 62% to US$919 million. Global sales rose 13.8%.

“Samsung achieved outstanding results in the second quarter with our consumer electronics business remaining strong and a solid performance in the still challenging components market,” Robert Yi, Samsung’s vice president said from Korea.

LG, who last week announced a 9.2% lift in profits set to roll out new LED and OLED TV’s in Australia soon along with a premium range of products, has attributed their increase in profits to robust TV and phone sales.  The Company has also benefited from hefty foreign exchange gains following a drop in the dollar against the local currency.

Analysts said the outlook for both Samsung and LG is bright going into the second half, with the strong momentum in their handset and liquid-crystal-display television businesses set to continue.

On the other hand Sony is expected to announce further losses with their Playstation and Bravia TV divisions losing further ground in the last quarter.

 

The Japanese Company has also admitted that their digital camera and camcorder divisions and their Vaio notebook divisions, are also losing money despite the Company delivering superior products to their competitors.

 The better-than-expected Samsung profit forecast also confirmed that the information technology sector is recovering from the global recession. “There’s no doubt the industry has turned the corner and is moving towards normalcy, albeit slowly,” says Song Myung Sup, electronics analyst at brokerage HI Investment & Securities in Seoul.

According to BusinessWeek The big surprise was the impressive profitability of the TV business. Samsung is showing that tough competition among TV makers does not necessarily mean profits have to be razor-thin. Samsung’s Digital Media division, which makes TVs, computers, printers, and other home electronics products, earned $848 million in the second quarter, up from $304 million three months earlier and $112 million a year ago.

That represents a respectable profit margin of 9%. Samsung didn’t provide a breakdown of the contribution from TVs alone, but Michael Min, an electronics specialist at fund manager Tempis Capital Management, figures about 75% of the $848 million profit came from selling TVs. “Margins in TVs must have topped 10%,” he says. “That’s like a hitting a home run.”

Samsung’s strategy is to concentrate on high-end LCD (liquid-crystal display) TVs, particularly those using LEDs (light-emitting diodes) as a light source. Even as consumers worried about rising unemployment are cutting back on spending, Samsung this year introduced a new line of large-screen LCD TVs sporting LEDs that cost some $600 more than traditional flat-screen sets. Then it splurged on hundreds of millions of dollars in marketing to promote LED-lit TVs that offer a brighter and sharper picture, a thinner screen, and greater energy efficiency.

 

 

The rapid improvement in profitability also underlines the resilience of Samsung. “The company has taken advantage of its better cash position and a weak Korean currency to keep pouring money into marketing, which makes Samsung among the first beneficiaries of a recovery,” says Park Kyung Min, chief executive officer at asset manager Hangaram Investment Management. The Korean won has lost its value against the dollar by 26% since the beginning of last year.

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