Samsung sees gradual improvement

By Kim Yoo-chul

Samsung Electronics said Thursday that it will post a gradual improvement in profits this year on its stronger memory chip business.

"This year will be challenging. But profit will improve as we see stronger performances in the memory and non-memory chip sectors. Our cost-cutting efforts in handsets will also help us recover profits," said a company official.

Samsung said it estimated its operating profit for the fourth quarter of last year at 5.2 trillion won, a 37 percent drop, year-on-year but an increase of 28 percent from a quarter earlier.

Sales during the quarter reached 52 trillion won, a decrease of 12 percent from the previous year, but an increase of 10 percent from the previous quarter.

Market analysts were impressed by the company's performance in the latest quarter as Samsung had been expected to report a quarterly operating profit of less than 5 trillion won.

"This was quite impressive. The non-memory chip division trimmed operating losses, while the memory chip division earned more than market expectations. Meanwhile, its smartphone unit also cut expenses for fancy marketing. Currency moves against the U.S. dollar also factored in a positive way," said Do Hyun-woo at MiraeAsset Investment.

Company officials and market analysts say worries about the company's corporate future were "far exaggerated" because "Samsung 2.0" earnings will be driven far more by components, where the firm has a sustainable long-term advantage.

"I personally feel more confident in the long-term stability and growth of earnings from today's levels. We have some issues; however, Samsung grew its corporate size by beating out market challenges and uncertainties," said a senior Samsung executive by telephone.

The company is on track to grow in the months and years ahead.

The Internet of Things (IoT), which Samsung identified as one of its next cash-revenue streams, is no longer a pipedream as the company is pushing related strategies to make the trend real.

The executive said Samsung Electronics will be teaming up with other group of technology affiliates, including Samsung SDS and Samsung C&T to create an open system to kickstart the IoT revolution.

Towards that path, Samsung Electronics created a new decision-making body with Samsung Electronics co-CEO Yoon Boo-keun, mobile chief Shin Jong-kyun and its chief financial officer Lee Sang-hoon that will decide on investment for IoT-related business projects.

"If IoT projects yield tangible returns, then capability between devices, components and telecom needs to be integrated in a structured way. The three top executives will make final calls in key decisions to save time and for faster execution," said the executive.

Samsung sold 665 million devices last year, many of which have Internet connectivity already. But the co-CEO Yoon said that by 2017, 90 percent of these devices will plug into the IoT ecosystem, and that will rise to 100 percent in five years.

Samsung's zeal to create its own ecosystem has also expanded into platforms.

Samsung said that all its TVs this year will use Tizen software, a move aimed at cutting its huge reliance on Google Android software and to grow into new markets.

IoT also throws up concerns over data privacy, with Yoon describing how businesses will have more opportunities to sell services and goods through pervasive user tracking.

"That's why the Tizen platform will be weighed more. We can't drop Google Android. But amid today's waves for openness and connectivity, you can't survive without your own. As Samsung's indisputable advantages lie in manufacturing, if we can grow new ecosystems, then we will grow more," said another official at Samsung.

Samsung is the global leader in televisions, handsets and memory chips.

"Samsung is diversified in product portfolios and has the capability to address challenges in the shortest time. The key thing is how to push these new business projects and if the managers are ready to wait until the results come."