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Samsung profit guidance disappoints, memory outlook cloudy

Reuters  |  SEOUL 

By Joyce Lee

SEOUL (Reuters) - Electronics Co Ltd said it would likely rake in a record fourth-quarter profit but the guidance fell short of consensus estimate, spooking investors already worried that a memory chip boom could be ending sooner rather than later.

Shares of fell almost 4 percent as the world's biggest chipmaker became one of the first major firms to indicate disappointing could be on the radar at a time when NAND memory chip prices are easing.

pegged its October-December operating profit at 15.1 trillion won ($14.1 billion), an all-time high and up 64 percent from a year ago but shy of a 15.9 trillion won average estimate from 17 analysts surveyed by It estimated revenue at 66 trillion won, also slightly below expectations.

The rival did not elaborate on its performance.

However, two analysts said a strong won and a year-end bonus for staff in the business likely dented the South Korean firm's quarterly profit by about 400 billion won and 400-500 billion won, respectively.

shares ended down 3.1 percent, versus the broader market that fell 0.1 percent and shares in rival that fell 1.7 percent, amid worries over the outlook for and the "super-cycle".

"The currency effect and bonuses appear to be the main reason for (Samsung) missing market forecasts, but shipments are also likely to be lower than expected," said Song Myung-sup, at & Securities.

"Considering Apple and Chinese firms' sales weren't stellar either, overall mobile demand appears to have been sluggish."

will disclose detailed for the fourth quarter on Jan. 31.

The last time a guidance statement disappointed the market was in the wake of the embarrassing withdrawal of its fire-prone Galaxy Note 7 handsets in October 2016.

Based on the quarterly guidance, Samsung's 2017 operating profit is likely to come in at 53.6 trillion won, versus previous year's 29.2 trillion won.

"We see potential downside risk to component orders and sales beyond Q1," said in a note on Tuesday, adding the current consensus profit estimate for the first quarter may be adjusted.

MEMORY AND MOBILE

likely benefited from higher DRAM chip prices in its latest quarter, analysts said.

But the outlook for in 2018 is mixed. shares have fallen 12 percent from their all-time high in early November as some investors bet on an end to the memory boom.

NAND flash memory chips, used in things like and USB drives, have entered a down-cycle and there is a view among some industry observers that DRAM market conditions also will soften later this year.

Others however expect DRAM supply to remain tight throughout 2018 as Google, and expand data centres used for cloud storage and

The outlook for and other mobile devices, which analysts expect to contribute about 17 percent to Samsung's fourth-quarter earnings, is also uncertain due to competition from Chinese rivals in markets like and

Tom Kang, research director at data provider Counterpoint, said Samsung's mobile division should show "moderate" shipment growth of about 1-2 percent in 2018.

South Korean exporters like will be keeping a close eye on the won in 2018. The currency traded on Monday at its highest in more than three years.

($1 = 1,067.7000 won)

(Reporting by Joyce Lee; Editing by Stephen Coates and Himani Sarkar)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, January 09 2018. 16:37 IST
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