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Samsung Electronics reports first quarterly loss

Fri, 01/23/2009 - 7:10am
Kelly Olsen, AP Business Writer

SEOUL, South Korea (AP) – Samsung Electronics, the world's largest manufacturer of flat-screen televisions, memory chips and liquid crystal displays, posted its first-ever quarterly loss Friday as the global economic slump hit prices and demand for mainstay products.

Samsung lost 20 billion won ($14.4 million) in the three months ended Dec. 31, the company said. Samsung posted 2.21 trillion won in net profit a year earlier.

The net loss – Samsung's first since the company began reporting results on a quarterly basis in the third quarter of 2000 – underlines the challenges facing electronics companies worldwide as major economies flounder in recession.

The Suwon, South Korea-based company has struggled with falling prices for chips and flat screens, as well as the waning consumer appetite that has hit other Asian electronics manufacturers including Japanese giant Sony Corp.

On Thursday, Sony projected its first annual loss in 14 years, while South Korea's LG Electronics Inc. reported a record quarterly net loss. Japan's Panasonic Corp. said earlier this month it would slash about $1.5 billion from its planned investment in two new flat-screen TV plants and shut down unprofitable businesses.

Samsung's results showed that "our company could not escape the rapid decline in the global economy," Robert Yi, vice president for investor relations, told a conference call.

The result was not as bad as the net loss of 92.93 billion won forecast by an Associated Press survey of 10 analysts. But on an operating basis, the company racked up red ink to the tune of 940 billion won, much worse than the forecast of a loss of 319 billion won. That loss was also a first.

Operating earnings are seen as a direct indicator of core business performance while net profit or loss also reflects taxes, dividends, asset sales and other items.

"The global economic slowdown had an adverse effect on consumer purchases of electronics goods in the fourth quarter, traditionally a strong period for electronics companies," Samsung said in the release.

Fourth-quarter sales rose to 18.45 trillion won from 17.48 trillion won the year before, but less than the 20 trillion won expected by analysts.

Samsung shares fell 4.1 percent to close at 442,000 won.

On the bright side, Samsung said mobile phone sales rose to a record during the quarter despite a 5 percent contraction in the global market for handsets. The company, the world's No. 2 mobile phone manufacturer, sold about 200 million handsets in 2008, an increase of 22 percent from 2007.

The handset market in developed economies such as the United States and Europe will decline by 10 percent or more in 2009 to about what it was in 2004, Chi Young-cho, senior vice president of strategic planning, told the conference call. Emerging markets are expected to slow, he said.

"We expect 2009 to be quite challenging compared to any previous years," he said.

Samsung announced a major restructuring last week, consolidating business operations into two divisions. This week the company said it had replaced most of the heads of its overseas regional headquarters.

It also announced the redeployment of more than 80 percent of the almost 1,400 employees at its Seoul headquarters.

For all of 2008, Samsung said that net profit fell 25.6 percent to 5.53 trillion won from the year before, while sales rose 15.5 percent to 72.95 trillion won.

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