Samsung Electronics Q1 Earnings Plunge but Beat Expectations

Samsung Electronics reported better first quarter earnings than analysts expected on Friday, led by its mobile phone division, but remained cautious about business going forward due to the global recession.

The world's largest memory chip and LCD panel maker said its net profit fell 72 percent year-on-year to 620 billion Korean won (US$461.7 million), while its revenue grew 9 percent to 18.97 trillion won.

The company reported stabilizing memory chip and LCD panel prices as well as better profit margins in its mobile phone division.

But Samsung remained cautious overall about sales going forward.

"It's very difficult to gauge the demand outlook," said Robert Yi, vice president of investor relations at Samsung, during a conference call.

In mobile phones, which turned in a good performance for Samsung in the first quarter, the company predicted emerging markets will continue to drive handset demand this year.

But, "demand in emerging markets is slowing down," said Kim Hyungdo, a vice president in Samsung's telecommunications division.

LCD panels, the screen part of computer monitors and laptop PCs, have benefitted from price increases recently, but the company was unsure that could last.

"We will monitor whether LCD panel prices continue to rise despite sluggish economic conditions," said Cho Yeongduk, a vice president in Samsung's LCD Business.

Rising prices for memory chips such as DRAM and NAND flash memory may also be short lived.

Price increases will lead to production increases and that will send prices down again, said Cho Namseong, a senior vice president in Samsung's semiconductor business.

He noted that there are still too many idled production lines in the memory chip sector that could come back online as memory chip prices increase, only to flood the market again.

"We aren't seeing any clear indication of demand improvement," he said.

One analyst on the conference call noted that Samsung's view of the market going forward was less upbeat than other technology companies and asked what Samsung saw that other companies might not be seeing out in the market.

"I'm actually quite interested to know what they see that we don't see," said Yi.

Ford posts $1.4 billion 1Q loss, uses less cash

DEARBORN, Mich. – Ford Motor Co. reported a first-quarter loss of $1.4 billion Friday and said it used less of its cash, emphasizing that it doesn't expect to seek any of the government assistance that is keeping the rest of the Detroit Three alive.

The nation's second-largest automaker said it spent $3.7 billion more than it took in during the first three months of the year, far less than the $7.2 billion it spent in the fourth quarter of 2008.

Ford shares climbed 76 cents, or 17 percent, to $5.25 in morning trading.

Chief Financial Officer Lewis Booth said the company is confident that it will slow the drain on its cash even further this year, and he said Ford will make it through 2009 without needing government aid. He would not speculate, however, about 2010.

"This is a very, very difficult environment," Booth said. "We're comfortable we'll get through this year."

While General Motors Corp. and Chrysler LLC have accepted $17.4 billion in federal aid and are racing toward deadlines to make deep cuts or file for bankruptcy, Ford was the first U.S. automaker to modify its contract with the United Auto Workers union and strike a deal to make up to 50 percent of payments to a union-run health care trust in stock instead of cash. The company also completed tender offers to reduce its debt by more than one-third.

The company said the moves would result in annual savings of $1 billion.

Ford drew the last $10.1 billion from its revolving line of credit during the quarter and said it had $21.3 billion in cash as of March 31. That's down from $28.7 billion in the same period last year.

Ford's first-quarter loss compares with a $70 million profit a year earlier. On a per share basis, Ford lost 60 cents, compared with earnings of 3 cents a share for the comparable quarter a year ago.

Revenue was $24.8 billion, down nearly 37 percent from $39.2 billion in the same quarter of last year, as Ford's U.S. sales declined 43 percent.

On a pretax basis excluding special items such as a gain from its March debt exchange, Ford lost 75 cents a share, beating analysts estimates. Eleven analysts polled Thomson Reuters expected a $1.23 per share loss on revenue of $22 billion.

Booth called the first-quarter performance "solid" compared with Ford's fourth-quarter loss of $5.9 billion, which led to a $14.6 billion loss for 2008, the worst annual loss in the company's 106-year history.

"I think the important comparison for us is, 'are we improving versus the fourth quarter?' Because the fourth quarter, things were really dreadful," Booth said.

He said cost cuts and better pricing for its vehicles helped the company narrowed its losses, and he expects continued improvement for the remainder of the year. Booth said Ford cut structural costs by $1.9 billion and predicted Ford would likely exceed its $4 billion cost-cutting goal for the year.

Ford said it remains on track to break even or post a profit on a pre-tax basis in 2011.

One day after GM said it would temporarily close 13 North American plants for up to 11 weeks this summer to slash production, Ford said it has increased its second-quarter production forecast to 902,000 units, up 19.5 percent from the first quarter. North American production is expected to rise 25 percent to 435,000 vehicles.

The increase is due to seasonal adjustments and because of first-quarter production cuts to reduce dealer inventory. Ford shut down 10 North American assembly plants for an extra week in January to deal with the auto sales slump.

Special items improved earnings by $362 million. Ford's $1.1 billion gain on its debt exchange was offset by a $664 million impairment charge due to a reduction in the book value of its Swedish Volvo unit. Ford classified Volvo as "held for sale," meaning that it's likely the unit will be sold in the next 12 months.