Samsung Will Increase Acquisitions in Pursuit of New Growth

Samsung Electronics Co. will pursue more international acquisitions as Asia’s biggest technology company by revenue seeks to grow beyond its core consumer-electronics businesses amid fears of market saturation.

The maker of Galaxy smartphones will be more aggressive in making deals after spending about $1 billion investing in 14 companies since 2010, Chief Financial Officer Lee Sang Hoon told a briefing in Seoul today. Those prior investments include Sharp Corp. and Medison Co. as the Suwon, South Korea-based company tries to better integrate its hardware and software offerings.

The world’s biggest maker of smartphones, televisions and memory chips is holding its first analyst briefing with top management since 2005 amid concerns those businesses are peaking because of undercutting on prices by low-cost Chinese manufacturers. The shares (005930) are heading for their first annual decline in five years as the company becomes more dependent on smartphones sales, which analysts warn will begin slowing even as Samsung sells one of every four handsets worldwide.

“Going forward, we will expand our mergers-and-acquisitions strategy beyond a few target areas to pursue opportunities across a wide range of fields,” Lee said. The company wants to “enhance the competitive edge of our current businesses and capture new chances for future growth,” he said.

The company is considering a dividend payout of 1 percent of its average stock price, it said today. Samsung currently trades with a dividend yield of 0.54 percent, according to data compiled by Bloomberg.

Share Slide

Shares of Samsung fell 2.4 percent to 1,450,000 won as of 2:30 p.m. in Seoul. The stock has dropped 4.7 percent this year and lost $26 billion of market value in June after analysts at JPMorgan Chase & Co. and Morgan Stanley lowered sales and profit estimates, citing slower shipments of its flagship Galaxy S4 smartphone.

The company, which overtook Apple Inc. (AAPL) in smartphones, has used sales of cheaper handsets in emerging markets to stoke earnings in mobiles as growth in high-end devices slows amid market saturation.

Samsung will spend $14 billion on research and development by the end of this year, compared with $8 billion in 2010, Lee said today.

About 400 analysts and technology experts are attending the briefing with presentations by heads of its display, mobiles, chip and consumer electronics units.

Capital Spending

“Samsung wants to communicate better with the market, the quarterly earnings announcement used to be the only channel that market observers and investors could use,” Nam Dae Jong, an analyst at Hana Daetoo Securities Co. in Seoul, said before the briefing. “The event should give a clearer outlook on the company in the longer term.”

The company has earmarked a record 24 trillion won in capital expenditure this year and had spent about 63 percent of the total as of Sept. 30. The spending this year is larger than the market value of Sony Corp. (6758)

The company is targeting annual sales of $400 billion in 2020, co-Chief Executive Officer Kwon Oh Hyun said.

Samsung last month posted record third-quarter earnings after extending its lead in the smartphone market and benefiting from a rally in chip prices.

Wearable Devices

Full-year net income is expected to rise to 31.4 trillion won ($29.6 billion), according to the average of 29 analyst estimates compiled by Bloomberg. Sales may rise to 232.1 trillion won, according to 41 analyst estimates.

The mobile unit, responsible for about two-thirds of earnings, posted record operating profit of 6.7 trillion won in the third quarter as the company tapped demand in China and India for mid-priced handsets.

Samsung this year added the S4, released the Galaxy Gear smartwatch, introduced the first phone with a curved screen and registered designs for spectacles to challenge Google Inc. (GOOG)’s Glass in the wearable devices market. It sold about 120 million handsets in the third quarter, researcher Strategy Analytics said Oct. 29.

The company will sell a combined 100 million units of its Galaxy S and Note series handsets this year, Shin Jong Kyun, head of Samsung’s mobile business, said today.

Source:Bloomberg