Technology slowdown hits Samsung

Samsung Electronics of South Korea on Friday echoed the technology sector gloom foreshadowed Thursday by LG Electronics, Nokia, Sony and Microsoft, when it reported its first-ever quarterly loss, helping to send Asian stock markets lower.
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The world's biggest manufacturer of memory chips and liquid crystal displays has been badly hit by a collapse in demand and price pressures in those segments. It reported Friday an operating loss of 937 billion won, or $672 million, for the October-December quarter compared with a 1.78 trillion profit during the same period a year earlier. The loss was below what analysts had expected.

But Samsung finished the quarter with a net loss of 22.2 billion won. It had been expected to report net loss of 256 billion won, according to a survey of 11 analysts by Reuters. The net loss was helped by tax refunds and earnings from affiliates outside South Korea.

Sales at Samsung's chips division last quarter fell 18 percent from June-September, and LCD sales declined 12 percent, showing how rapidly the financial crisis and credit squeeze following the collapse of U.S. banking giant Lehman Brothers in mid-September prompted companies and consumers to rein in spending.

The lower sales resulted in a loss of about 560 billion won for Samsung's semiconductor division.

Samsung, the world's second-largest chipmaker after Intel, had been expected to post an operating loss of 440 billion won on sales of 4.72 trillion won from the chip business, according to a Bloomberg survey.

The chip sector, in particular, is suffering. It is capital intensive, while price pressure sent computer memory chips down 42 percent in the final three months of 2009, according to Dramexchange Technology, operator of the biggest Asian spot market for chips, Bloomberg News reported.

Widening losses have forced chip makers in Taiwan to seek government aid, while Hynix Semiconductor of South Korea, the world's second-largest computer-memory maker, received financial aid from creditor banks.

With no improvement in the global economy expected until much later this year, at the earliest, companies like Samsung, Sony and automakers around the world are set for an even tougher time in this quarter forcing many into painful cost cuts and restructuring.

A string of company results has highlighted the deteriorating environment this week.

LG Electronics, which makes mobile phones and flat screen televisions, swung to its first net loss in seven quarters and said Thursday that it expected sales and profitability to decline further this year.

Nokia, the Finnish cellphone maker, reported Thursday a sharper fall in profits than analysts had projected and said it expected global cellphone sales to fall another 10 percent.

Microsoft announced the first significant lay-offs in its 34-year history after reporting a slump in profits for the quarter that ended December. The company plans to lay off 5,000 employees, or 5 percent of its work force.

Sony announced after the close of trade in Tokyo on Thursday that it expected to report a loss of $3 billion for the 12 months ending in March. Sony shares on Friday reacted with a 6.2 percent plunge, helping to send the Nikkei 225 stock share down 2.3 percent.

In Seoul, Samsung fell 3.6 percent and LG declined 4.7 percent.

More bad news is expected in coming weeks as companies like Toyota and Toshiba release their earnings.

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BY Bettina Wassener
Source：International Herald Tribune

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