Samsung Expects Record Q4 Profit As Legal Loss Risks New Growth

Samsung Fourth Quarter Record Profit

Apple’s primary market and legal rival Samsung is not letting its court losses get it down, and the company expects a record operating profit for the third quarter, The Wall Street Journal reported Thursday. According to some analysts, however, a record third quarter may represent the high point for the Korean electronics company for the foreseeable future.

In the past year, Samsung has jumped ahead of Apple and other competitors to become the world’s largest smartphone maker, and its flagship product, the Galaxy S III, has become the best-selling smartphone worldwide (although no measurement has yet evaluated the new iPhone 5’s impact on that race).

These market successes were recently dampened by legal setbacks. Apple and Samsung are currently involved in multiple lawsuits around the world, and Samsung recently lost a major patent suit in U.S. Federal Court in August, the final outcome of which may result in several of Samsung’s key products being banned from sale in the United States.

Despite the impending injunctions, Samsung expects record high profits for the quarter ended September 30. Operating profits are expected to fall between 7.9 and 8.3 trillion won (US$7.09 and $7.45 billion), up from 4.25 trillion won ($3.8 billion) for the same quarter last year. The company’s current operating profit high was set in the April to June quarter, at 6.72 trillion won.

These profit numbers are expected to come on revenue of between 51 and 53 trillion won ($46 to $48 billion), compared with 41.27 trillion won a year ago.

While Samsung leadership may be optimistic, shareholders are not. Samsung’s mobile business, the business most directly threatened by legal repercussions, accounted for nearly 70 percent of the company’s total operating profit for the quarter.

Shares of the company, which peaked in May, have held steady as investors fear a major impact on the mobile business as a result of the company’s ongoing patent litigation and potential injunctions in major markets.

“The third quarter may be the peak in terms of earnings. The fourth-quarter operating profit is expected to decrease 7.8% on quarter to 7.2 trillion won as slower profit at its telecom unit seems inevitable because of an increase in marketing expenses,” Lee Sun-tae, an analyst at NH Investment & Securities, told The Wall Street Journal.

In its favor, however, Samsung is expected to release new smartphones in the coming months, and may be able to transition its product line away from hardware and software that has been found to infringe on Apple patents, thereby minimizing the impact of a sales injunction.

Samsung’s final results for the quarter will be released later in October. Apple will reveal its fourth quarter results on October 25.

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