Samsung comeback against Apple may be fueled by record S6 sales

April 9, 2015 02:21 PM

(Bloomberg) -- Samsung Electronics Co. expects the pair of Galaxy S6 smartphones that debut Friday to set a sales record, with analysts predicting shipments could reach 55 million this year and help the company overcome a recent surge by Apple Inc.

Demand for the Galaxy S6 Edge, which features a screen stretching down both sides, probably will exceed supply as the company works to manufacture enough flexible screens, Co-Chief Executive Officer Shin Jong Kyun said in Seoul on Thursday. The other model has a traditional flat display and will cost less.

Optimism about the new high-end devices fueled a rally in Samsung shares as investors count on new designs to spark consumer attention and the use of Samsung’s own processor and modem chips to bolster profit margins from components. The new phones will be released in 20 countries Friday -- including the U.S., U.K. and Germany -- with China sales starting April 17.

“S6 is the best made phone by Samsung in terms of design or specifications,” said Keon Han of Credit Suisse Group AG in Seoul, one of the top-ranked analysts following Samsung. “The market, carriers and even consumers are all on the same page that Samsung’s new phone is different from the past models.”

Han expects the company to sell as many as 50 million units this year, setting the stage for an earnings boost from mobile to components. The analyst, whose recommendations delivered among the top returns to investors according to data compiled by Bloomberg, has an outperform rating on the stock.

Earnings Rebound

“Considering the response from the market, consumer and carriers, we expect the S6 will see record sales among the previous S series,” said Lee Sang-Chul, executive vice president and head of mobile sales at Samsung.

Lee didn’t specify a time-frame or sales target. Samsung will ship 49.8 million S6 units this year, according to the average of eight analysts surveyed by Bloomberg. Analysts estimate the company shipped about 38.3 million units of the S5 and more than 65 million of the S3 released in 2012.

IBK Securities Co. in Seoul predicts Samsung could ship as many as 55 million S6 models.

Shares of Samsung were unchanged at 1,479,000 won as of 1:44 p.m. in Seoul. The stock has risen 9 percent since the phones were first unveiled March 1, adding about $16 billion to the company’s market value.

Analysts have upgraded earnings forecasts for the three months ending June and project that Samsung will post its first profit gain in seven quarters. Samsung evolved the S6 design and used more of its own parts to lure rival smartphone makers to buy its chips and displays, analysts said.

Toppling Apple

“Samsung stuffed in all the most advanced components, from processors to memory chips, made by itself in the S6, and that can bring a huge ripple effect across its businesses,” said Ko Jung Woo, a Seoul-based analyst at BS Securities Co.

Even at the top of the analyst range, the S6 will be outsold by Apple, which shipped more than 74 million iPhones in the December quarter, riding momentum in China from its move to bigger screens. Samsung fell back into a tie with Apple that quarter as the world’s biggest smartphone vendor, according to Strategy Analytics Inc.

The new S6 models have 5.1-inch screens, which are in between the screen sizes of the iPhone 6 and 6 Plus.

Samsung’s previous Galaxy S devices, the S4 and S5, failed to match the success of predecessors as critics focused on their similar appearance, plastic casings and clunky versions of Google Inc.’s Androidoperating software.

For the new devices, Samsung chose metal bodies, finally catching up to the premium design used by Apple and other high- end producers, and cut the amount of its own software on the device.

“We expect Samsung to regain its position as the world’s clear No. 1 smartphone vendor by volume,” said Neil Mawston, executive director of Strategy Analytics. “Samsung has done a great job of recovering from its S5 mis-launch in 2014.”

Samsung’s operating income may rise to 7.4 trillion won ($6.7 billion) in the second quarter, up from 7.2 trillion won a year earlier, according to the average of 25 estimates compiled by Bloomberg in the past four weeks.




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