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Samsung profit dips 41 percent
SEOUL, South Korea (Reuters) -- Samsung Electronics reported a worse-than-expected 41 percent drop in first-quarter profits Friday on a slump in memory chip prices, but its shares rose on hopes of an industry rebound. Weak PC demand because of the global economic slowdown forced Samsung, the world's top memory chip maker, to cut contract chip prices almost every two weeks during the quarter to push products out the door. "The results are slightly worse than expected," said Kim Tae-woo, a fund manager at Mirae Asset Management. "But investors are betting memory chip prices will pick up in the second quarter after hitting the bottom in the first quarter." Samsung itself called the outlook "cloudy" amid increased competition in the mobile phone business and a sluggish global economy. The company said its mobile phone business held up well, but its average selling prices are slipping as the world's third-largest handset maker shifts its focus to lower-end cell phones to boost market share. Samsung earned 1.13 trillion won ($938 million) in net profit for the three months ended in March, falling short of analysts' consensus forecasts of 1.37 trillion. This compared with a 1.91 trillion profit a year ago. Turnover was 9.6 trillion won versus 9.93 trillion. Shares in Samsung, South Korea's largest issue with a market value of about $39 billion, are 3.6 percent higher at 313,000 won in afternoon trade Friday. "Investors have priced in much of the bad news linked to the fall in memory chip prices for weeks," said Oh Sung-shik, fund manager at Franklin Templeton Investments. Samsung's diversified product portfolio has helped shield it from the global downturn. The flagship of the Samsung Group, South Korea's largest conglomerate, also makes televisions, refrigerators and washing machines. Despite a prolonged slump in chip prices, Samsung remains the only profitable major memory chip maker, while rivals such as Micron Technology Inc of the United States and South Korea's Hynix Semiconductor Inc have splashed red ink. The average selling price for 256 megabit dynamic random access memory chips fell to $5.60 in the first quarter, down sharply from $9.00 a year before, analysts said. But Samsung said this week it was talking to its customers to raise contract prices for memory chips. The handset maker also said it sold 13.2 million mobile phones in the first quarter compared with 11.6 million units sold in the fourth quarter of 2002 but the average selling price dropped about five percent. Samsung has doubled its global handset share to 10 percent in two years, overtaking both Germany's Siemens Sony Ericsson, and is now challenging mobile phone giants like Motorola and Nokia.
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