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Business

Samsung flags first-quarter profit jump

The South Korean tech giant's estimate for operating profit in the quarter has beaten market expectations boosting hopes that its struggling mobile business will post its first annual profit in three years.

The world's largest smartphone producer announced Thursday that its operating profit in the January-March period was expected to reach around 6.6 trillion won (4.8 billion euros, $5.6 billion), up from 6 trillion won in the same quarter a year ago.

The figure marked a jump of about 10 percent in operating profit and was substantially higher than the 5.53 trillion-won average estimated by analysts polled by Bloomberg News.

The result will encourage shareholders after a disappointing 2015 that saw Samsung lose more than $8 billion in market value. Last year, the South Koreans' flagship smartphone business suffered due to rising sales of Apple's newest iPhone, while Samsung's lower-end devices lost market share to fast-growing Chinese outfits like Huawei and Xiaomi.

Boost from new Galaxy models

Analysts attributed the strong rise in first-quarter profit to robust sales of Samsung's latest version of its Galaxy smartphone in March - a month earlier than the previous year and ahead of new launches by its competitors.

The combined shipments of the Galaxy S7 and Galaxy S7 Edge are estimated to have reached 10 million units within 20 days after the launch.

Neil Mawston, executive director of industry analyst Strategy Analytics, thinks the Galaxy S7 will become the "world's best-selling Android smartphone" in 2016. "Samsung's range of lower-cost models, like the J series, is also selling well," he told the news agency AFP.

The Galaxy S7 models have come with an improved camera, waterproofing and microSD storage support, and are estimated to become Samsung's top earner for the first time in seven quarters.

At the same time, the South Korean won weakened against the US dollar and helped lift the company's first-quarter bottom line.

Profit growth sustainable?

However, competition from new products such as Apple's recently launched iPhone SE and Huawei's upcoming flagship P9 phone are tempering enthusiasm about Samsung.

Greg Roh, analyst at HMC Investment, told the news agency Reuters that Samsung's earnings had "peaked this year" as marketing costs were set to rise in the coming quarters, pushing down profits. And C. J. Heo from Alpha Asset Management told the same news agency: "S7 sales popped in the beginning but could very well fade as rivals launch new models."

Investor response to the estimate was equally wary, with Samsung's share price closing down 1.25 percent on Thursday.

The firm will not disclose a full breakdown of its results until late April, and gave no comment on the performance of its business divisions.

uhe/cjc (AFP, Reuters, dpa)

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