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Samsung breaks records to lead the world

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Samsung Electronics has announced record profits on the same day that market data revealed it had taken an all-time record share of the overall phone market.

The group announced revenues of R345.3 billion (47.6 trillion won) on a consolidated basis for the second quarter ended June 30, 2012, a 21% increase year-on-year.

At the same time, Startegy Analytics announced new market data that showed Samsung had sold 50.5 million smartphones in the quarter, and a total of 90 million phones – giving it an all-time record 26% share of the global phone market.

“Global mobile phone shipments grew just 1 percent annually to reach 362.0 million units in Q2 2012,”” said Alex Spektor, Associate Director at Strategy Analytics. “”Fuelled by surging demand for its popular Galaxy models, Samsung was the star performer, shipping 93.0 million mobile phones worldwide and capturing a record 26% marketshare to solidify its first-place.””

Strategy Analytics reported that Nokia’s global handset shipments continued to decline, albeit at a more moderate minus 5% annual rate, reaching 83.7 million units in Q2 2012.

Apple shipped 26 million iPhones worldwide in Q2 2012.

For the quarter, Samsung’s consolidated operating profit reached a record R48.7 billion (6.72 trillion won), representing a 79% increase year-on-year. Consolidated net profit for the April-June period was R37.6 billion (5.19 trillion won).

In its earnings guidance disclosed on July 6, Samsung estimated second quarter consolidated revenues would reach approximately R340.9 billion (47 trillion won) with consolidated operating profit of approximately R48.6billion (6.7 trillion won).

Samsung posted solid sales and maintained its profit streak in the second quarter across all business segments, excluding semiconductors, amid lingering global business uncertainties. Digital Media & Communications comprising the Consumer Electronics and IT & Mobile Communications business sectors accounted for R265.3 billion (36.57 trillion won) in sales, up 37% year-on-year.

For Device Solutions, the results were mixed. While operating profit for the Display Panel segment registered an on-year increase, the Semiconductor Business saw profits drop by 38% compared with the same period last year, despite outperforming the previous quarter.

By business unit, the Mobile Communications Business was one of the leading growth drivers in the June quarter with R148.8 billion (20.52 trillion won) in revenue. With the successful launch of this year’s flagship GALAXY S III smartphone and robust GALAXY Note sales, the handset unit saw earnings jump by 75%from a year earlier.

The Visual Display Business also contributed to earnings gains with its diverse portfolio of TV models for both developed and emerging markets with R62.24 billion (8.58 trillion won) in revenue for the quarter.

‚””Despite a difficult business environment, we achieved stable profits in the second quarter through our differentiated products and competitive technology,‚”” said Robert Yi, Senior Vice President and Head of Investor Relations. ‚””As we move into the second half, continued fiscal instability in Europe and its effect on the global economy will result in the possibility of a slower-than-expected recovery and intensified market competition.‚””

Mr. Yi added that despite the economic uncertainties, ‚””Samsung will enhance the competitiveness of our main businesses and reinforce our value-added, differentiated products as a means to improve earnings.‚””

Overall, the third quarter is expected to be marginally positive as demand for consumer electronics goods, including smartphones and tablets, remains strong and a stream of new products hit the market. Supply for display panels is also expected to increase, as TV makers prepare for the year-end holiday season.

Capex R101.5 billion (14 Trillion Won) in First Half

Capital expenditure in the first six months was R101.5 billion (14 trillion won), with R70.4 billion (9.7 trillion won) invested in the Semiconductor Business and R18.8 billion (2.6 trillion won) in the Display Panel segment. The total capex for the first half accounted for 56% of the annual capex budget of R181.3 billion (25 trillion won) planned for 2012. Capex for the first quarter was R56.5 billion (7.8 trillion won).

Mobile AP Chips Sustain Growth

Samsung’s Semiconductor segment including the Memory and System LSI businesses posted an operating profit of R8.05 billion (1.11 trillion won) on revenue of R62.3 billion (8.6 trillion won) for the quarter, which equates to a 6% year-on-year decline in sales.

Weak global demand for PC DRAM chips still weighed on Samsung’s push for a recovery, although it responded to increased orders for server and mobile DRAM and hastened migration to the 30-nanometer and below process.

The NAND market picked up on higher OEM-related demand, improving quarter-on-quarter sales, particularly in solution products such as Solid State Drives (SSDs) for notebook PCs and Embedded Multimedia Cards (eMMC), but a steepening price decline hampered stable growth.

The System LSI Business, which creates application processors (AP) and image sensors for smartphones, is forecasted to maintain profitability in the third quarter as demand for faster and higher-capacity chips used in mobile devices increases.

Samsung will also look to gain a leading edge in the mobile AP business, following the recent announcement of our acquisition of CSR’s mobile business and NanoRadio, which we expect to reinforce our already differentiated mobile AP technology.

In the third quarter, we anticipate a weaker-than-expected recovery in demand for PC DRAM due to lackluster back-to-school orders and intensifying competition.

In contrast, we expect market conditions for NAND to improve in the lead-up to the National Day and Black Friday holidays in China and the U.S., respectively. Samsung will continue to concentrate on value-added products such as server and mobile DRAM.

Display Panel Continues Improvement

The Display Panel segment recorded an operating profit of R5.4 billion (750 billion won) on revenue of R59.8 billion (8.25 trillion won). This amounted to a R3.4 billion (470 billion won) increase in profit from the previous quarter and a 16% increase in sales compared to the same period last year.

Despite weaker than expected panel demand due to the economic slowdown in Europe and low seasonality, Samsung’s total TV panel shipments increased in the low 10% range on-year due to strong sales of high, value-added products such as panels for 3D TVs and LED TVs.

Looking ahead, demand for TV panels is expected to grow in the next quarter as TV makers prepare for the end-of-year high-demand season and the Chinese National Day holidays. The effect of an energy saving subsidy in China is also expected to stimulate demand for LED TV products.

For the IT panel sector, the continuation of weak demand for panels used in notebook PCs and monitors was offset by strong demand for tablet PC panels. Launches of new smartphone products also contributed to continued profitability in OLED panels.

In the third quarter, economic uncertainty in developed markets and the sluggish market demand for notebook PCs and monitors is expected to dampen overall demand. The expansion and diversification of the tablet PC market, however, is forecast to fuel an increase in demand for tablet PC panels and Samsung will aim to expand sales of LCD and OLED panels for smartphones.

Sales of Smart Devices Lead Gains

The IT & Mobile Communications division, comprising Mobile Communications, Telecommunication Systems, IT Solutions and Digital Imaging, registered quarterly operating profits of R30.3 billion (4.19 trillion won) for the second quarter. Revenue reached, R174.3 billion (24.04 trillion won) and the mobile unit accounted for R148.8billion (20.52 trillion won), a 75% increase year-on-year.

The highly anticipated launch of GALAXY S III and upbeat sales of GALAXY Note, along with a more competitive average selling price (ASP) than the previous quarter, have cushioned an on-quarter operating loss brought on by the seasonably weak earnings of businesses in IT Solutions and Telecommunication Systems.

Handset shipments gained quarter-on-quarter and year-on-year, driven mainly by global orders for premium smartphones.

A sales decline in Long Term Evolution (LTE) wireless broadband technology equipment and slow demand for PCs and printers in the quarter will turn around in the July-September quarter with the expansion of LTE networks in developed countries and modest revenue growth in IT products.

The smartphone market, in particular, will continue to be profitable as consumers are given a wider choice of new products at a wider range of prices while orders from emerging markets increase.

In the third quarter, Samsung expects to further strengthen its leadership in the high-end smartphone market with the sales of GALAXY S III and also in the LTE equipment business with new devices.

TV Demand Boosts Profitability

The Consumer Electronics Division encompassing the Visual Display and Digital Appliances businesses posted revenue of R88.14 billion (12.15 trillion won) for the second quarter, a 7%increase year-on-year. The operating profit of R5.51 billion (760 billion won) represented an increase of 66 percent compared with the same period last year.

Although demand for TVs remained flat year-on-year, Samsung posted improvements in both shipments and profitability. Increased sales in developed markets for the company’s premium TVs, such as the flagship ES7000 and ES8000 models, and expansion of region-specific LED TV models in emerging markets spurred a significant lift in earnings compared with the same quarter of last year.

This increase in demand saw Samsung increase its portion of LED TV sales from the mid 60% range to a mid 80% share, quarter-on-quarter.

Heading into the third quarter, although growth in developed markets may stall, Samsung aims to expand its presence in emerging markets with region-specific products and entry-level LED TVs. The company will also look to continue its leadership in Smart TVs in developed markets with continued cooperation with media and content providers.

As for Digital Appliances, sales of air conditioners rose on the back of strong seasonal demand and favorable market conditions in emerging markets. Moving into the third quarter, Samsung will focus on expanding sales of premium products and stabilising overseas operations in the face of a possible slowdown in emerging markets and weak consumer sentiment in developed markets.

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Loadshedding keeps small business from the cloud

New research shows nearly half of South African small businesses struggle with internet connectivity

New research reveals South African small businesses aren’t able to adopt cloud technology because of their connectivity problems. The third annual State of Small Business report from accounting software firm Xero, conducted in partnership with World Wide Worx (WWW), shows that over half (53%) of small businesses haven’t adopted cloud technology yet, due to connectivity problems.

Over half (59%) said that scheduled power outages by the national supplier posed a significant challenge for their business. In addition, more than two fifths (43%) said that their internet connection was ‘OK but not 100% reliable’. Other challenges cited include new technologies entering the market (29%) and compatibility with customers (45%).

The research represents the opinions of 400 South African small business owners and 200 South African accountants. Almost half (47%) said their staff were highly tech-literate, but more than two thirds (67%) don’t allocate budget for training employees to use the software provided.

Colin Timmis, General Country Manager, Xero SA and professional accountant said “Our most recent State of Small Business report gives a real insight into what it’s like on the ground for small businesses in South Africa. In uncertain times like these, technology can provide stability. For example, cloud software can help overcome issues with connectivity. It helps to make your business more agile, meaning you can work from anywhere at any time. Being able to move when there are scheduled power cuts or patchy internet is crucial to keeping your business running.”

Nearly all who had adopted cloud technology said that they noticed an increase in profit (98%) and an increase in efficiency (99%). More than half (51%) suggested that it had improved their ability to work anywhere, and a quarter (25%) said it had improved security.

In addition, nearly two fifths (38%) said their IT set up was ahead of the curve. Over half (56%) said they use basic automation, whether in operational or accounting tasks. A quarter (25%) said they were using Internet of Things (IoT) technology, followed by cloud computing (19%).

“It’s great that South Africa’s small businesses are seeing the benefits of adopting technology. But there will be a learning curve for anyone using new software and employees shouldn’t be expected to self-teach. Because people are more tech-savvy than they used to be, training normally only takes a few hours. It could make all the difference in getting return on investment on the technology that you buy”, said Timmis.

Other key findings from the research reveal:

  • Three quarters (79%) of small businesses claim that accounting software support is very important
  • Three quarters (78%) of respondents use accounting software to manage financial records and over half (55%) are using desktop solutions.
  • Only one fifth (22%) are using cloud accounting tools and nearly a quarter (23%) still do their books manually.
  • Only a tiny proportion of respondents (0.25%) are using AI and machine learning.

Download the report in full here.

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Uberising solar energy

A team of students from Strathmore University in Nairobi, Kenya on Thursday walked off as winners with R20 000 in prize money for an innovative concept to provide equitable energy access to remote villages based on, among others, “Uber(ising) solar energy.”

The team was one of four university teams participating in the African Utility Week and Powergen Africa conference and exhibition’s first ever Initiate! Impact Challenge. The 19th edition of the event gathered thousands of power, water and gas industry experts in Cape Town this week and ended on Thursday.

Student teams from Stellenbosch University, the University of Cape Town and the University of the Witwatersrand also took part in the three-day challenge sponsored by the Enel Foundation, the Innovation Hub, Lesedi Nuclear Services and the Russian Nuclear Agency Rosatom. The Initiate! Challenge aimed to create a platform for students and start-ups to drive innovation and share ideas for the energy sector.

Strathmore University’s winning team: (left to right) Fredrick Amariati, Ignatius Maranga, Raymond Kiyegga and Alex Osunga.

The Strathmore University team included engineering students Ignatius Maranga, Raymond Kiyegga, Fredrick Amariati and Alex Osunga. One member of the team will also have the exclusive opportunity to join the 5th annual student fact-finding mission to Russia to visit several state-of-the-art nuclear facilities and dedicated Russian nuclear universities. Maranga said the team is happy and humbled especially because they competed against some of the top universities on the continent. He said the teams’ winning idea is rooted in real life challenges that Kenyans in rural areas face. “The solutions offered so far to expand energy access are not solving these problems as many are not financially viable.”

The team’s idea is to put a solar panelled container in rural villages that will also house a clinic and a knowledge hub like a school for vocational training to teach people about the use and benefits of solar energy. It will also include a shop where villagers can buy daily essentials like milk.

Maranga said: “The school will help with capacity building as villagers will see and learn benefits of electricity and as the business grows, they will want to have electricity in their homes and when that point comes, we will have solar powered tricycles. These tricycles will carry and deliver batteries like Uber does passengers to villagers in more remote areas. The system is modular so we will add another container to charge batteries. These batteries are ferried on trikes, so villagers in more remote areas can request a number of charged batteries on their phone.”

Maranga explained that it is common cause that Africa is big, and many people live in remote rural villages. “So, it is not always possible to extend the power grid to these areas as it is very expensive. So, what do we do instead? Most people own a cell phone, and everyone needs electricity, so you take it to them. They cannot exactly carry a battery for two kilometres so why then not Uber a battery?” Maranga said their company Kijiji, (Swahili for village) will now look at commercialising their idea, optimise it and do market tests. “If accepted we want to roll it out depending on funding.”

The team’s idea appealed to the judges because it was a simple idea that is easy to replicate beyond Kenya to the rest of the continent. Chief executive officer of Rosatom Central and Southern Africa, Dmitry Shornikov, said: “We are very pleased with the solutions presented by the students. The maturity and depth of their research gives us great hope and proves that young Africans really are devoted to solving Africa’s energy challenges.”

Business Development executive at Lesedi Nuclear Services, Shane Pereira, in an earlier interview said the company partnered with Initiate! because it is dedicated to the youth that will be the leaders of tomorrow. “The growth and development as well as training, coaching and mentoring of the youth is critical to the success of our future economy.”

The ideas of the other three teams focused more on mitigating the risk of climate change and came up with ideas ranging from vertical farms to energy boxes.

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