Gloom for tech as Samsung profit slides

IN AN ominous sign for hi-tech companies around the world, Korean powerhouse Samsung Electronics has reported a 52% slump in quarterly profit only two months after chief executive Yun Jong Yong boasted to shareholders that 2004 profits were bigger than Microsoft's.

The deterioration since then has been worse than expected. Even the gloomiest analysts expected a 31% slide as prices of memory chips, liquid-crystal displays and mobile phones decline.

Samsung, the top memory-chip maker and the third-largest mobile phone maker, reported 1.498 trillion won (£963m) net profit for the first quarter to 31 March.

Samsung chalked up a record net profit of 3.14 trillion won for the first quarter of 2004 on sales of 13.8 trillion won, compared with 14.4 trillion won this year. Prices for LCDs, the core of flat-screen technology, slipped 5% after a crash of more than 40% in the second half of 2004, although growing demand for the 17-inch monitor offers some hope that prices may be stabilising.

Manufacturers such as Samsung have spent more than £20bn to ramp up flat screen production and all are feeling the pinch.

'The second-quarter outlook is quite challenging but we'll do our best to generate new revenues,' Chu Woosik, Samsung's senior vice president said.

Samsung's profit margin for the mobile phone division recovered to 17% in the first quarter from 3% in the previous quarter, but that is down from 26% a year ago due to lower prices.

Samsung is forecast to earn a 8.44 trillion won net profit this year, down 22% from a record 10.79 trillion won last year.