Samsung Electronics Co, the world's top memory chip maker, reported its weakest quarterly profit in almost two years and warned of challenging business conditions.

Intense competition in the smartphone and tablet market might put pressure on Samsung's telecoms unit as Apple sees soaring demand for its iPad and Sony joins the foray with the launch of its first tablets in autumn.

Apple is seeking to keep Samsung, which is emerging as the company's strongest competitor, at bay, with lawsuits, claiming Samsung's Galaxy line of mobile phones and tablets slavishly copy the iPhone and iPad.

But the overall outlook for Samsung, the world's top maker of flat screens, TVs and No.2 handset vendor, is improving as its bread-and-butter memory chip business is rebounding after Japan's earthquake raised supply concerns.

Although the memory chip business is reviving, other operations such as telecommunications and display are facing tough times ahead. Its race with Apple seems pretty difficult and income in its display division is in slump, said Han Se-woong, a fund manager at AssetPlus Investment Management.

Samsung reported a 2.95 trillion won ($2.75 billion) operating profit for January-March compared to the consensus forecast for a 3.1 trillion won profit by Thomson Reuters I/B/E/S. That was broadly in line with Samsung's estimate earlier this month for an operating profit of between 2.7 trillion won and 3.1 trillion won.

Shares in Samsung, whose $136 billion market value is now bigger than Intel's and Hewlett-Packard's, were down 1.3 percent by 0110 GMT in a broader down 0.8 percent.


Samsung said business conditions in the memory chip market would improve slightly in the current quarter and demand for NAND flash chips would also sustain growth momentum thanks to solid smartphone and tablet markets.

Samsung forecasts that the challenging business conditions will persist in the second quarter, effected by lingering worries over the global economy and tight competition in consumer electronics and mobile businesses, it said in a statement on Friday.

The first-quarter profit, the lowest since the second quarter of 2009, compares with a 3.0 trillion won profit in the preceding quarter and 4.4 trillion won a year earlier.

On Wednesday, Samsung broadened its patent dispute against Apple, filing a lawsuit in federal court in California, arguing that Apple's iPhone, iPod and iPad had infringed its 10 mobile technology patents after making similar claims in Korea, Japan and Germany last week.

Samsung rolled out a new version of its flagship Galaxy S smartphone on Thursday and expects the model to sell more than 10 million units as the product makes a global debut from May through 140 carriers in 120 countries.

Its previous model sold around 14 million units since its June launch last year.

The stock has fallen 5 percent so far this year, compared with an 8 percent rise in the KOSPI.

Prices of dynamic random access memory (DRAM) chips, used in computers, have rebounded since last month's earthquake in Japan.

(Additional reporting by Ju-min Park; Editing by Jonathan Hopfner and Anshuman Daga)