Samsung posts profit warning

October 27, 2008 // 12:25 p.m.

Tags: #profit #samsung #sandisk #share #warning

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.

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