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Smartphones Power Record Profits For Samsung

(c) Sky News 2012

Samsung has posted a record net quarterly profit, powered by strong smartphone sales despite the global downturn.

The South Korean company reported a profit of £2.9bn in the second quarter, and is the world's biggest technology firm in revenue terms.

It also reported a record operating profit between April and June of 6.72trn Korean won (£3.76bn).

The net profit represented a 48% gain from a year earlier while operating profit jumped 79% year-on-year.

Samsung cited robust demand for its mobile devices including high-margin smartphones, along with strong sales of ultra-thin displays.

Total (Other OTC: TTFNF.PK - news) revenue rose 21% to 47.59trn won (£26.61bn), in a quarter that is usually quieter for technology companies.

Market researcher Strategy Analytics said in sheer number terms, Samsung continues to trounce key competitor Apple (NasdaqGS: AAPL - news) in the smartphone market.

The Korean firm increased its share of the global smartphone market in Q2 to 34.6%, compared to 17.8% for arch-rival Apple.

Samsung shipped 50.5 million smartphones, the largest number ever by any vendor in a single quarter, it said in a report.

"Samsung has been able to deliver hit models in most major price segments," Strategy Analytics noted, while Apple fans may be awaiting the launch of the next generation iPhone around September or October.

Samsung remained the world's biggest seller of all types of mobile handset in April to June, with a 25.7% market share compared to Nokia (Stockholm: NOKI-SEK.ST - news) 's 23.1%.

The firm licenses microchip technology from ARM Holdings (LSE: ARM.L - news) , which has become a UK high tech success story.

The Cambridge-based firm designs chips used in nearly every mobile in the world, and announced earlier this week of increased pre-tax profits of 23% to £66.5m in the three months to the end of June.

Although Samsung's profits are stellar considering the dampened global environment, it did warn about ongoing concerns.

"As we move into the second half, continued fiscal instability in Europe (Chicago Options: ^REURUSD - news) and its effect on the global economy will result in the possibility of a slower than expected recovery and intensified market competition," senior vice-president Robert Yi said.

But analysts were more bullish, expecting an even better performance in coming quarters.

They said smartphone earnings – which account for more than 50% of operating profit – would remain a strong contributor to the bottom line.

The company has sold more than 10 million Galaxy S III phones since its launch about two months ago.

Kiwoom Securities analyst Kim Sung-In forecast likely overall operating profit of at least £4.3bn in the third quarter.

"I would sell Apple shares and buy Samsung. Samsung's operating profit margin also will exceed that of Apple in the next quarter," Mr Kim said.