Samsung posts 53% jump in expected Q1 profit ahead of Galaxy S4 launch

Samsung Electronics said it expects its first-quarter operating profit to be around $7.7 billion, up 53 percent from around $5.02 billion in the year-ago period and beating analysts' estimates. The company, even without the soon-to-be-released Galaxy S4, still managed to produce strong smartphone sales in the period, analysts said.

Samsung said total revenue for the firm, which makes everything from handsets to TVs, refrigerators and chipsets, jumped to an estimated $45.8 billion, up from around $40 billion in the year-ago quarter. Samsung will report full quarterly earnings April 26.

Samsung's operating profit guidance was better than an average forecast of $7.32 billion in a poll of 42 analysts by Thomson Reuters I/B/E/S.

Samsung's results do not include sales of the Galaxy S4, which is scheduled to launch by the end of the month. Samsung has said it will roll out the Galaxy S4 through 337 operators in 155 countries. In the United States, the company's overall sales are likely going to be goosed by a new partnership it announced with Best Buy to open 1,400 "Samsung Experience Shops" within Best Buy locations nationwide. Samsung said that by early May, 900 Best Buy and Best Buy Mobile stores will feature the new Samsung mini-stores, with the remainder launching by early summer.

"Second-quarter profit looks even better than the first, as the Galaxy S4 will have a great impact," Chung Chang Won, a Seoul-based analyst at Nomura Holdings, told Bloomberg. "Samsung's shipments of its flagship smartphone will outpace that of the iPhone sometime in the second or third quarter."

The challenge for Samsung at this point is keeping its momentum going as the world's largest smartphone and handset maker. Seo Won-seok, an analyst with Korea Investment & Securities, told the Journal that he estimates Samsung shipped 68 million smartphones in the first quarter and 104 million handsets overall. He said he expects Samsung's smartphone shipments to rise to 75 million units in the second quarter and its total handset shipments to rise to 110 million units.

Samsung is also expected to launch a major marketing blitz for the Galaxy S4, something that has some analysts worried about the company's positioning. Samsung spent a record $11.5 billion on marketing last year, according to Reuters, which was $1.3 billion more than what it poured into research and development. "(Samsung) lagged behind in creating a new category," Canalys analyst Rachel Lashford told Reuters. "Apple created a new category with tablets. We are waiting to see something like that happen from Samsung."

In fact, Samsung confirmed in March it is working on a smart watch which may rival a similar product that is Apple reportedly working on as the race to develop wearable computing devices heats up. "We've been preparing the watch product for so long," Lee Young Hee, executive vice president of Samsung's mobile business, told Bloomberg. "We are working very hard to get ready for it. We are preparing products for the future, and the watch is definitely one of them."

For more:
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Reuters article
- see this separate Reuters article

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