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Samsung Q1 CE Segment Sales Drop 23%

4/15/2005 12:48:00 PM Eastern

Seoul, South Korea — Restructuring efforts resulting in reduced emphasis on low- to mid-end product lines pushed sales down 23 percent in the digital media segment, namely consumer electronics, at Samsung Electronics.

CE segment sales in the first quarter, ended March 31, hit $1.6 billion, compared with the $2.1 billion recorded in the same three months in 2004.

Samsung recorded a $39.3 million operating loss in its CE segment in the first quarter, compared with an operating profit of $137.4 million in the year-ago three months. However, higher margins from sales of premium product lines reduced the size of the quarter-over-quarter operating loss, down from the negative $127.6 million reported in the fourth quarter of last year.

Strengthening of the Korean won made pricing of Samsung products more expensive in the United States, ultimately cutting into earnings. The company’s mobile phone sales, which came in at $4.48 billion in the fourth quarter, edged downward 1 percent from $4.52 billion year-on-year. However, the telecommunications segment, mainly phones, saw an operating profit decline of 33 percent in the fourth quarter, as profit margin eroded, down to $824.4 million, from the $1.2 billion recorded in the same three months in 2004.

Prices of LCD panels continued downward as demand for flat-screen TVs failed to keep up with ongoing manufacturing investment. Samsung’s LCD segment recorded first-quarter sales of $1.9 billion, down 20 percent from the $2.3 billion reported in the same three months a year ago. LCD segment operating profit came in at $19.6 million in the first quarter, off 97 percent, when compared with the $824.4 million reported in the first quarter of last year. However, segment earnings more than doubled the $9.8 million produced in the fourth quarter of 2004.

Consolidated first-quarter sales at Samsung fell 4 percent to $13.6 billion, from $14.1 billion in the year-ago period. In a harder hit, consolidated operating profit dropped 46 percent to $2.1 billion in the first quarter, compared with $3.9 billion in the same three months in 2004. Net profit for the first quarter dropped 18 percent to $1.5 billion, from $1.8 billion in the fourth quarter of last year. Net profit in the first quarter of 2004 came in at $3.1 billion.

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