Samsung Electronics Q1 earnings plunge but beat expectations

The company remained cautious about demand going forward due to the global recession

Samsung Electronics reported better first quarter earnings than analysts expected on Friday, led by its mobile phone division, but remained cautious about business going forward due to the global recession.

The world's largest memory chip and LCD panel maker said its net profit fell 72 percent year-on-year to 620 billion Korean won (US$461.7 million), while its revenue grew 9 percent to 18.97 trillion won.

The company reported stabilizing memory chip and LCD panel prices as well as better profit margins in its mobile phone division.

But Samsung remained cautious overall about sales going forward.

"It's very difficult to gauge the demand outlook," said Robert Yi, vice president of investor relations at Samsung, during a conference call.

In mobile phones, which turned in a good performance for Samsung in the first quarter, the company predicted emerging markets will continue to drive handset demand this year.

But, "demand in emerging markets is slowing down," said Kim Hyungdo, a vice president in Samsung's telecommunications division.

LCD panels, the screen part of computer monitors and laptop PCs, have benefitted from price increases recently, but the company was unsure that could last.

"We will monitor whether LCD panel prices continue to rise despite sluggish economic conditions," said Cho Yeongduk, a vice president in Samsung's LCD Business.

Rising prices for memory chips such as DRAM and NAND flash memory may also be short lived.

Price increases will lead to production increases and that will send prices down again, said Cho Namseong, a senior vice president in Samsung's semiconductor business.

He noted that there are still too many idled production lines in the memory chip sector that could come back online as memory chip prices increase, only to flood the market again.

"We aren't seeing any clear indication of demand improvement," he said.

One analyst on the conference call noted that Samsung's view of the market going forward was less upbeat than other technology companies and asked what Samsung saw that other companies might not be seeing out in the market.

"I'm actually quite interested to know what they see that we don't see," said Yi.

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