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Samsung: strong earnings despite faulty Note7s

Friday, October 07, 2016 - 01:50

The Korean tech giant expects quarterly profit to grow a comfortable 5.6 percent thanks to solid component sales. But as Tara Joseph reports, all eyes are on whether Samsung will yield to investor calls for a radical restructuring after the Note 7 recall scandal.

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A rosy earnings outlook from Samsung in the middle of a recall nightmare. The world's biggest smartphone maker on Friday saying it expects its operating profit grew more than 5-and-a-half percent in the third quarter. Comfortably beating expectations and boosting shares that were already at record highs - after calls for a radical corporate makeover. (SOUNDBITE) (English) REUTERS REPORTER, TARA JOSEPH, SAYING: "Quarterly guidance is traditionally a strong indicator of Samsung's earnings performance, and also sets the tone for its stock price. The company's been making headlines for all the wrong reasons lately - after the exploding battery saga that forced 2-and-a-half million recalls of the Galaxy Note 7 - wiping billions off its market cap. That's left many people wondering how a company's that's suffered such a bruising setback can do so well" One simple reason is that many analysts lowered their expectations after the recall...setting a low bar for Samsung to beat. Adding to that, the ultimate cost of the recall is still up in the air - since executives made absolutely no reference to it in the filing. On a more positive note - analysts say Samsung's semiconductor business could see its highest profits in a year... Thanks - at least in part - to demand from major rivals including Apple, who use Samsung chips to build their own smartphones. Friday's guidance may be a breath of fresh air at a tough time for Samsung. But it'll take a lot more to bring stability to the company. Activist investor Elliott Management has issued a rallying cry to split the firm in two - potentially disrupting an important succession plan. Easier said than done for a business that's been run by the same family since it was founded nearly 80 years ago.

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