Shares Dip As Galaxy Powers Samsung Earnings

Samsung has reported record quarterly earnings - largely thanks to the success of its Galaxy smartphone - but investors remain unimpressed.

The world's largest maker of memory chips, mobile phones and flat-screen panels estimated its second-quarter operating profit at between £3.67bn and £3.93bn.

This would be a 79% jump from a year earlier based on the midpoint of that range. It will release a detailed earnings report later this month.

Despite the good news, its shares fell 2.2% on the Seoul stock exchange as lower-than-expected overall sales underlined the threat from Europe's economic woes.

The chronic European debt crisis is taking a toll on demand in Europe, North America and China.

These are the key markets for manufacturers of personal computers, televisions, mobile phones and home appliances.

Consumers and PC and TV makers are primary revenue sources for Samsung, which supplies chips and flat-screen panels for global PC and TV makers in addition to selling its own finished products.

Yoon Boo-keun, the president of Samsung's television and home appliance division, admitted the global television market had shrunk from a year earlier during the first half of this year.

He said the company was preparing for a possible crisis with a contingency scenario for each region.

Market research firm International Data Corp predicts growth in the mobile phone industry's handset shipments this year will be the slowest in three years at just 4% because of the uncertain economic conditions.

Analysts, including Lee Sun-tae at NH Securities & Investment, said Samsung's low-end smartphone sales in China were less than expected in the second quarter.

They said this was due to competition from Chinese handset makers and slowing demand there.

Brisk demand for high-end mobile phones is helping Samsung offset weaker profit growth in its semiconductor and other consumer electronics businesses.

But analysts believe its heavy reliance on smartphones is a source of concern. Samsung's shares have been under pressure since hitting a record high on May 2.

The company failed to keep up with demand for the Galaxy S III smartphone which was released on May 29, causing delays in sales.

Analysts cut estimates of Samsung's Galaxy S III sales in the second quarter to around six million smartphones from seven million.

Shin Jong-kyun, Samsung's president of mobile business, promised last month that Galaxy component shortages would be resolved soon, but his remarks failed to boost the company's share price.