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Samsung posts profit warning

Samsung posts profit warning

Samsung's profit warning - and drop in share price - comes just days after withdrawing its bid for SanDisk.

Samsung's claims that it's SanDisk's poor profit potential that nixed plans to purchase the flash memory specialist may not have been completely honest if figures released this weekend are accurate.

According to ExtremeTech the South Korean giant has posted a 44 percent drop in quarterly net profit due to massive reductions in the value of flat-screen displays and memory chips. Accordingly, the stock market has responded with a 14 percent drop in Samsung's share price.

Ch Woo-Sik, executive in charge of investor relations at Samsung, stated that “the market environment in the third quarter proved challenging amid rising costs and a downturn in the global economy” and claimed that “we foresee the coming months to be an even more challenging period” with no recovery expected at least the second half of 2009, when the company is hoping the world market for memory chips might pick up a bit.

While Samsung is hardly on the rocks just yet – in fact, it remains the only memory manufacturer to actually post a profit this quarter, albeit a slim one – the screws are tightening, and may go some way to explain the company's sudden decision not to go ahead with the planned purchase of flash memory specialist SanDisk for $26 per share. While the official company line was that the withdrawal of interest was due to “growing uncertainties in SanDisk's business [and] its stand alone value,” it seems quite likely that a sudden lack of funds may have contributed to the decision.

Do you think that Samsung will be able to recover from the current economic downturn without taking a chance with a few strategic acquisitions like SanDIsk? Share your thoughts over in the forums.

2 Comments

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salesman 27th October 2008, 15:48 Quote
Well isn't this what was expected when the third quarter profit reports would come out? Now I don't think samsung is going to be the company that goes out of business, I think there's other that would go first within that aspect of things, but things are going to be hard for all consumer electronic companies this holiday season. Look at amd though, they didn't quit when intel had them beat, or when nvidia had them beat for that matter, its just not in the best of conditions that businesses want to do business in. Tough luck.
TheoGeo 27th October 2008, 20:07 Quote
Samsung probably just feels that if the market continues to shrink the way it is at the moment, then it'll have no need to buy sandisk and even if it later decides to buy it out, it'll get a much better price a few months down the line.
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