Samsung stocks buck owner concerns

An employee at Yonhap Infomax, a data news provider, points to Samsung Electronics’ closing stock price, which ended up Monday despite Chairman Lee Kun-hee’s hospitalization after suffering a cardiac arrest over the weekend. Samsung Electronics closed up 4.0 percent at 1.39 million won. / Yonhap

By Choi Kyong-ae

Health concerns about Samsung Electronics Chairman Lee Kun-hee, 72, are not a major consideration for investors in their decisions, analysts said Monday.

Shares in Samsung Electronics and other Samsung affiliates rose on the first trading day of the week despite news of the group owner’s heart attack over the weekend.

Lee is now in “stable condition and recovering” at a hospital in Seoul after suffering a sudden cardiac arrest on Sunday, Samsung Group said in an emailed statement.

“Investors are not taking the potential impact of the chairman’s deteriorating health on the group’s businesses seriously, due to his reduced role in operations,” Lee Kyoung-min, a market analyst at Woori Investment & Securities, said by telephone.

Instead, he said, “They expect Samsung’s ongoing business reorganization to accelerate further, bringing more transparency to the group.”

Such expectations pushed up most of Samsung Group stocks, outperforming the broader KOSPI gain. Samsung Electronics, Samsung Life and most other stocks closed higher.

Lee still seems to have a final say in strategic decisions. But he has not been directly involved in operations at the country’s biggest conglomerate by market value, analysts said. Three co-chief executives have successfully controlled Samsung’s three core businesses ― mobile, chip and home appliance units ― in recent years.

Analysts pointed out that there is a big difference involving owner health concerns with Samsung compared to Apple, the two archrivals in the mobile phone industry.

Unlike Apple which suffered sharp declines in share prices after Steve Jobs’ death in late 2011, analysts and industry people expected Samsung will walk a different path even when its chairman is no longer on the job.

“Steve Jobs had a direct control of software development and engineering functions. But Lee is not taking such a role at Samsung,” E-trade Securities tech analyst Kim Ji-woong said. “Lee has been busy reorganizing businesses to deliver the full control of over 80 Samsung affiliates to the hands of his three children.”

In hopes that the technology behemoth will be firmly managed by his only son Lee Jae-yong, and two daughters Lee Boo-jin and Lee Seo-hyun, the business tycoon is tidying up Samsung’s vast range of affiliates to pass them on to his children without causing any problems.

Under a holding company, analysts said the rearrangements will have Jae-yong take the helm of the flagship electronics business, with his elder sister Boo-jin and younger sister Seo-hyun controlling non-electronics operations, which include hotels, and the production of fashion clothing and food.

“Reorganization will result in higher dividends for shareholders, more focus on core businesses, reduced cross-shareholdings in group companies and transparency in corporate governance,” Kim at E-trade said.

“It will give a bigger boost to Samsung stocks.”

To be sure, the reorganization moves come amid concerns that Samsung’s flagship mobile unit is slowing down in recent quarters.

Samsung has grown rapidly enough in the past decade to challenge Apple on robust sales of its Galaxy S smartphone series. But the high-end smartphone market is nearly saturated; so there are growing worries that Samsung badly needs to find a new growth engine or at least develop its existing businesses into future growth drivers.