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Samsung’s 1Q profit forecast beats estimate

April 6, 2015

SEOUL, South Korea (AP) — Samsung Electronics Co. said Tuesday that its first-quarter operating income likely beat analysts’ consensus.

Though the company did not give reasons when it released its preliminary results, analysts said robust demand for the company’s mobile chips and improvement in its smartphone business were behind the better-than-expected financial results.

The company’s earnings preview put its January-March operating profit at 5.9 trillion won ($5.4 billion), which was higher than analysts’ consensus of 5.5 trillion won according to financial data provider FactSet. That was a 31 percent drop from a year earlier.

Samsung estimated that its sales fell 12 percent to 47 trillion won ($43 billion) during the quarter.

The company’s operating profit was an improvement from the previous two quarters when its mobile business, which accounts for two-thirds of Samsung’s income, suffered from a sales slowdown. Analysts believe the South Korean company’s profits hit a bottom during the third quarter as its smartphone sales slowed, with criticism mounting about the cheap-looking, plastic design of the Galaxy S5 smartphone.

Analysts expect a continued recovery in Samsung’s bottom line in the current quarter as the company is set to launch the latest version of its flagship smartphone, the Galaxy S6, in major countries on Friday.

After criticism that its phones look too cheap and are too complicated to use, Samsung ditched plastic, using aluminum and glass for the new flagship smartphone’s body. The company also removed many apps that were installed on the phones that critics said cluttered the space without being useful.

Solid demand for semiconductor devices that are used as components for mobile gadgets will continue to help drive a recovery in Samsung’s profits, according to analysts. Samsung is the world’s largest maker of memory chips. For the upcoming Galaxy S6 smartphone, the company is supplying its own mobile processor that works as the brain of the phone.

Samsung is scheduled to release its full earnings results later this month, including net income and a breakdown for each business division.