Samsung Electronics Says Business Outlook Not Good

SEOUL (Reuters) - Samsung Electronics Co. Ltd., the world's top maker of memory chips, said on Monday the outlook for its key businesses was not good due to slower global economic growth and sluggish domestic consumption.

Samsung, a technology powerhouse that makes everything from chips to flat screens and mobile phones, also told an annual shareholder meeting it has not yet decided whether to buy into a $1.2 billion share sale by its cash-strapped credit card unit.

"The world economy is facing slower growth this year and the domestic consumption is still sluggish. So there are big risk factors going forward. The outlook for our key businesses is not good," Yun Jong-yong, Samsung's vice chairman, told an annual meeting of shareholders.

Yun reiterated Samsung's sales target of 58.7 trillion won ($58.2 billion) this year, slightly higher than 57.6 trillion in 2004, and said the company would strive to beat last year's net profit of 10.79 trillion won. Analysts are expecting only 8.6 trillion won, according to Reuters Estimates.

Shares in Asia's most valuable technology company, which has a market capitalization of $84 billion, were up 0.19 percent at 523,000 won by 0415 GMT, underperforming the wider market.

Korea's KOSPI stock index rose more than 1 percent to its highest in over five years as stronger-than-expected industrial output data boosted hopes for a recovery in consumer spending from a two-year slump.

SAMSUNG CARD BAILOUT

A group of minority shareholders called the People's Solidarity for Participatory Democracy (PSPD) blasted the company for bailing out Samsung Card, underscoring growing pressure on South Korean firms over management ethics.

"Samsung Electronics should pull out from the card business as soon as possible, and we oppose the participation in Samsung Card's rights offering," said Kim Sang-jo, executive director of the PSPD.

Samsung Electronics, the top shareholder in unlisted Samsung Card with a 46.5 percent stake, is expected to take part in a 1.2 trillion won share sale announced in January to boost the balance sheet and ease bad debt woes at its card unit.

Last year, Samsung Electronics bought 600 billion won worth of new shares from Samsung Card to ease a cash shortage.

"The company has not made any decision regarding the rights offering," said Choi Do-seok, a company president. "The board will make a final decision which is beneficial to shareholders after considering pros and cons in participating."

Samsung Card, South Korea's second-biggest credit card firm, is suffering from a soured consumer credit boom and wants to raise capital ahead of a tightening of provisioning rules by financial regulators.

Bailouts of struggling companies by healthier affiliates have been criticized by many investors and analysts as hurting minority stakeholders. They say it has revived some of the management practices that helped create the country's financial crisis in the late 1990s.

Samsung, the world's top liquid crystal display (LCD) producer, said in mid-January it expected handset profit margins to bounce back in the first quarter and flat-screen prices to recover as soon as the second quarter.

It competes with LG.Philips LCD Co. Ltd. in flat-screens and with Nokia and Motorola Inc. in the mobile phone business. (Additional reporting by Kim Miyoung)

Copyright © 2005 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in ExtremeTech.