Electronics giant resists pressure from activist investor as it posts highest profits in nearly four years
Samsung has posted a very healthy rise in profits and strong fiscal performance, despite heavy pressures on the electronics giant.
The firm is facing inside pressure from activist investor Paul Elliott Singer, who wants the firm to carry out a corporate restructuring.
And Samsung has also been rocked by political woes, as its vice chairman and heir apparent Jay Y. Lee is currently on trial over an influence-peddling scandal in South Korea. Lee remains in detention by the Korean authorities.
For the first quarter ended 31 March, Samsung posted net income of 7.68 trillion won (£5.25bn), up from 5.25 trillion won (£3.6bn) in the same year-ago quarter. This puts Samsung’s profit at the highest level in almost four years.
Analysts had only been expected a profit of 6.77 trillion won (£4.6bn), and shares in the firm soared to a record high as a result. There was equally good news on the sales front as revenue for the quarter came in at 50.55 trillion won (£34.6bn), from 49.79 trillion won (£34bn) in the same year ago quarter.
Samsung attributed its strong performance to its increased sales of its memory and display businesses products. But the bad news is that sales from its key mobile business decreased due to a decline in flagship product sales, namely the price adjustment of the Galaxy S7.
Samsung of course was hit hard last year after the Galaxy Note 7 exploding battery debacle, but the company is doing everything in it’s power to put things right. And things are certainly looking more positive (at least financially) for the company.
Going forward, the firm said that in the second quarter, it expects to achieve growth thanks to the continuing robust memory performance, coupled with improved earnings from the mobile business following the global rollout of the Galaxy S8 and S8+.
That said, there have been some problems. Samsung earlier this month announced that it has delayed the release of Bixby, its own virtual assistant to take on Apple’s Siri, the Google Assistant, and Microsoft’s Cortana.
And other than the legal woes surrounding its heir apparent, there is also the issue of an activist investor.
“We are encouraged that Samsung Electronics has agreed to take the bold step of optimizing its balance sheet through a cancellation of its legacy holding of treasury shares,” Elliott Management said in an emailed statement to Bloomberg. “We think there is room for even more progress due to the company’s announced commitment to enhance its board.”
Samsung however has decided to turn down calls for a corporate restructuring, and has offered instead to reward shareholders by paying its first-ever quarterly dividend. It has also cancelled tens of billions of dollars in treasury shares.