Falling euro forces Samsung into emergency mode

By Kim Yoo-chul

Samsung Electronics said Wednesday that it has shifted into emergency mode to better cope with the fallout from the deepening eurozone economic crisis.

This is the first time in four years that the electronics giant has declared a need for ``crisis management’’ since the company first adopted the scheme in late 2008 when the company reported 800 billion won in operating losses during the fourth quarter of that year.

The biggest factor that forced the company to go into emergency mode was the ``highly-fluctuating currency,’’ said Rhee In-yong, top communications officer, in a briefing to reporters at the firm’s headquarters.

``The euro is rapidly losing its currency value. Samsung Electronics is currently being run by scenario-based management as the eurozone is one of its biggest markets,’’ said the executive.

Europe’s economic ailments are pushing the euro to fall against the dollar. The euro is currently trading at around $1.26 to $1.28, down sharply from $1.48 in May, last year.

The fall in the euro has caused Samsung Electronics to suffer from a steep decline in the dollar-denominated revenue and profit, pushing it to accelerate group wide efforts to secure its bottom-line, officials said.

``But the current situation is looking somewhat better than 2008 because Samsung Electronics is seeing an increase of quarterly profit,’’ Rhee told reporters.

The company is expected to report about 7 trillion won as quarterly operating profit for the April-June period in its earnings guideline to be announced Friday. In the first quarter of the year, it struck a record operating profit of 5.8 trillion won.

``It’s not true that all affiliates are operating crisis management systems as their key markets are different. Affiliates are responding to their own interests,’’ according to the executive.

Samsung said the company’s heavy dependence on smartphones is also hurting the company's soundness in terms of profit balance.

``Samsung’s profit-making structures are unstable,’’ said Rhee. Out of the 5.8 trillion won operating profit that the company earned in the first quarter, 70 percent came from its smartphone business, while the remaining 30 percent was from semiconductors and others.

Samsung is the world’s biggest phone maker, while it is also the planet’s top supplier of chips and flat-screens.