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Samsung confident of rebound after Q4 profit drops 34%

Share price falls 3% as coronavirus death toll hits 170 in China

After a rocky fourth quarter, Samsung Electronics is optimistic about the year ahead.    © Reuters

SEOUL -- Samsung Electronics is confident that demand from 5G and data centers will help its memory chip business bounce back this year after the company's overall operating profit tumbled by a third last quarter.

The South Korean tech giant said on Jan. 30 that its operating profit for October-December came in at 7.16 trillion won ($6.04 billion), down 33.7% on the year, despite revenue growing 1.1% to 59.88 trillion won.

Shares of Samsung fell 3.21% to 57,200 won on the earnings announcement and news that the death toll of the coronavirus in China had jumped to 170. The benchmark Kospi fell 1.71% to 2,148.00.

Analysts say investors dumped Samsung's shares because they are worried that the coronavirus outbreak will hit the company's sales growth. China is home to Samsung's key corporate customers, including Huawei Technologies.

"Such a trend will continue until investors see credible evidences to believe that it is calming down," said Kim Yong-koo, an analyst at Hana Financial Investment.

Samsung's poor earnings were largely due to its chip business unit -- its operating profit plunged 55.6% on the year to 3.45 trillion won in the fourth quarter. The company's IT and mobile department saw its operating profit jump 66.9% to 2.52 trillion won during the same period, but it was not enough to offset losses from the semiconductors.

"Fourth-quarter profit dropped from a year earlier due to the continued fall in memory chip prices and weakness in display panels," the company said in a statement. "Improving demand for memory used in servers and mobile products, as well as solid sales of flagship smartphones, helped ease the decline in overall earnings."

It is a sharp contrast to Apple, whose revenue hit an all-time high for the three months through December as iPhone sales returned to growth for the first time since 2018. Apple recorded revenue of $91.82 billion for the first quarter of its 2020 fiscal year, the company announced on Jan. 28.

Samsung expects better performances this year as memory chip prices are rebounding. In the mobile sector, growing customer appetite for 5G and foldable smartphones will boost their sales, the company said.

"Looking ahead to 2020, Samsung expects improvements in overall business performance but also sees continued uncertainties in the global business environment," the company said. "The mobile business aims to improve profits by expanding sales of premium models, such as the enhanced 5G lineup and new foldable devices."

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