Booming demand for smartphones and tablets will help Samsung Electronics Co post better results this year after the world's No.2 mobile phone maker reported its weakest profit in six quarters.
The South Korean firm has been grabbing market share from Nokia and LG Electronics Inc with its Galaxy smartphones, and it leads a pack of companies trying to halt Apple's runaway success in mobile devices.
Samsung is moving in the right direction into smartphones and tablets. Rising competition is a concern but the pie is also growing, said Cha Kyung-jin, a fund manager at Golden Bridge Asset Management, which owns Samsung shares.
Samsung will be able to comfortably position itself in the market. And improving momentum in chips and flatscreens will further consolidate its position in the global technology industry.
The global smartphone market is set to grow more than 40 percent this year to over 400 million units, while the tablet market is likely to more than double to 55 million units, according to industry data. The explosion in these new consumer markets means Samsung is likely to get a bigger chunk of its profits from devices such as smartphones and tablets.
Samsung's cyclical memory chips business is also set to rebound with prices likely to bottom out in the first quarter, analysts said.
Shares in Samsung, whose $145 billion market capitalization is bigger than the combined value of Sony Corp, Nokia, Toshiba Corp and Panasonic Corp, gained as much as 2 percent to a record on Friday before closing up 1.6 percent.
Samsung, which worked out how to make black and white TVs in the 1970s by tearing apart Japanese models, overtook Sony as the world's most popular consumer electronics brand in 2005.
In a sign of Samsung's fast growth over the past decade, the company had the biggest booth, the thinnest products and by some accounts the best buzz at the annual Consumer Electronics Show in Las Vegas earlier this month.
Samsung Chairman Lee Kun-hee has been preparing for a generational shift to his only son Jay Lee for control of the firm, whose sales of 155 trillion won ($139 billion) last year were equivalent to more than half of South Korea's annual budget.
The world's top maker of flatscreens and televisions reported 3.0 trillion won ($2.7 billion) in operating profit for the October-December period, missing a consensus forecast of 3.4 trillion won in profit as polled by Thomson Reuters I/B/E/S.
But this was in line with Samsung's forecast of operating profit between 2.8 trillion and 3.2 trillion won. The result compares with a 4.9 trillion won profit in the preceding quarter and 3.4 trillion won a year earlier.
On Thursday, Nokia, the world's biggest cellphone maker, warned of a grim start to 2011 after rivals such as Samsung ate into its market share. Sony is also betting on new products to fend off competition from the likes of Samsung.
Samsung shares have risen by a third in the last three months, beating a 10 percent gain in the South Korean KOSPI index on expectations of a recovery in profits.
Out of 47 analysts tracking Samsung, only one has a hold rating and the rest either have a strong buy or buy recommendation, according to StarMine data.
STRONG RECOVERY IN SMARTPHONES
Profits from Samsung's telecoms division accounted for nearly half its total profit in October-December, helping offset the impact of a sharp profit drop in flatscreens and chips, which were the major earnings contributors for last year's record profit overall.
The rest of the profit came from the chip division, helped by strong demand for NAND-type flash memory chips widely used in smartphones and tablets, while home appliances swung into a loss. The flatscreen unit made a small profit.
Samsung has sold around 10 million Galaxy S smartphones, powered by Google's Android platform, since its June debut, and 2 million Galaxy tablets in the past three months.
It still has a long way to catch up with Apple, which sold more than 7 million iPads and 16.2 million iPhones last quarter alone. Apple says it is unable to build enough iPhones to meet demand.
One threat to Samsung this year will be a stronger won, which will reduce repatriated revenue for the export-oriented company and put it at a price disadvantage to Japanese rivals.
(Additional reporting by Hyunjoo Jin, Ju-min Park and Jungyoun Park and Clare Jim in TAIPEI; Editing by Anshuman Daga and Dean Yates)