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Samsung CE Segment Reports 19% Sales Slide

Seoul, South Korea — Second-quarter revenue in the digital media segment at Samsung Electronics dropped 19 percent, down to $1.6 billion from a year-on-year $1.9 billion, as the company reported weak seasonal demand and discontinuation of low-end products for the segment’s mainly consumer electronics mix.

The CE segment recorded increased shipments of premium televisions during the second quarter, ended June 30, namely PDP and LCD units.

Samsung posted a wider operating loss for its CE business during the second three months, climbing to a negative $48.4 million from a loss of $6.8 million in the second quarter of 2004.

The company’s mobile phone sales declined 9 percent in the second quarter, reaching $4.1 billion, compared with a year-on-year $4.5 billion. Overall shipments of handsets were flat at 24.4 million units, while shipments to North America increased. Samsung expects continued growth of replacement demand in North America, as the global handset market increases to 710 million units through the full year.

Sales in the company’s telecommunications segment, Samsung’s largest and mainly phones, declined 10 percent in the second quarter, to $4.3 billion, from $4.8 billion in the same period a year earlier. Operating profit for the segment in the three months dipped to $512.6 million, from $773.7 million last year, as margins for handsets narrowed.

Although prices of LCD panels continued to fall in the second quarter, and demand for flat-screen TVs slowed, Samsung expects a turnaround during the second half. LCD segment sales in the second quarter dropped 14 percent, hitting $2.1 billion, down from $2.4 billion year-over-year. Lower margins for flat-screen TVs led to a 32 percent decline in LCD segment operating profit, down to $96.7 million in the second three months from a year-ago $793 million.

However, the company has seen a gradual increase in business for its LCD operation, with sales increasing 12 percent over the first quarter of 2005, and it expects supply and demand to come into balance beginning with the middle of the third quarter. Generally, prices for both flat screens and memory chips should improve.

Lower panel prices should lead to a broader customer base in the panel market, while makers launch more new LCD televisions, said Samsung. The company anticipates its own solid large-panel shipment growth in the third quarter, as it concentrates on 32-inch to 46-inch models.

Consolidated sales at Samsung decreased 9 percent in the second quarter, down to $13.1 billion from a year-ago $14.5 billion.

Lower prices for memory chips and the ongoing lower margins for flat screens and mobile phones contributed to a 46 percent drop in consolidated net profit during the second three months, coming in at $1.6 billion, compared with a year-on-year $3 billion. Operating profit in the three months decreased 56 percent to $1.6 billion from a year-earlier $3.6 billion.