Sony, Samsung Results Suggest Tech Turnaround
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Samsung Electronics and Sony (NYSE: SNE) gave a robust outlook on improving demand and cost cuts, fueling hopes that a recovery in the global tech sector will outlive the pre-Christmas shopping season.
The strong showing from other Asian technology groups such as Sharp, Acer and Panasonic provided further ammunition for bullish technology investors, rounding out the industry's upbeat quarterly earnings.
"In the global IT sector, the recovery next year will be led by sectors that suffered most this year, such as PCs. The strongest recovery will be in memory chips," Mirae Asset Securities analyst Lee Hak-Moo said.
Taiwan PC firms Acer and Quanta issued upbeat sector outlooks, underscoring the recovery in consumer demand and boding well for peers such as Hewlett-Packard (NYSE: HPQ) and Dell (NASDAQ: DELL).
Globally, investors are taking heart from the United States' return to economic growth, which gives reassurance on the recovery's staying power.
On Thursday, data showed consumer spending, which normally accounts for more than two-thirds of U.S. economic activity, rose 3.4 percent in the third quarter, the fastest advance since the first quarter of 2007.
Samsung the world's top maker of memory chips and LCD screens, signaled bigger players are set to further widen the gap over smaller firms in a tech sector recovery.
The South Korean company, along with home rival LG Electronics, has made a spectacular turnaround this year, grabbing market share from the likes of Sony, which reported a loss for the fourth straight quarter on Friday.
"I don't see any risk in Samsung's competitiveness and there's zero chance supplies will rise significantly," said Song Myung-sup, an analyst at HI Investment & Securities. "But the macro economy remains a factor -- demand may weaken once stimulus plans are removed."
Samsung reported a record quarterly net profit thanks to resurgent sales and forecast a strong 2010 even as analysts cited risks of a fast recovering won and increased marketing spending.
Signs of turnaround at Sony
Sony earnings were hit by sluggish mobile phone sales and as it cut prices of its PlayStation 3 game console.
However, analysts noted signs of improvement in many units of the consumer electronics conglomerate.
"The initial impression is good. The results were lifted by an improvement in LCD TVs. Strong improvements were also seen in the financial business, especially Sony Life," said Kazutaka Oshima, chief executive at Rakuten Investment Management.
"The outlook looks a bit brighter, but we need to watch whether its semiconductor business will pick up. I also feel positive about its outlook as Sony managed to narrow down its losses despite the yen's strength."
Sony's mobile phone joint venture with Sweden's Ericsson saw its sales tumble and losses balloon as it has lacked a strong smartphone offering to rival Apple's (NASDAQ: AAPL) iPhone and Research in Motion's (NASDAQ: RIMM) Blackberry.
Sony executives were cautious on the near-term outlook.
"We cannot help but be cautious about the year-end shopping season. In the first and second quarters our performance was better than expected, but the real battle is Christmas," Sony CFO Nobuyuki Oneda told a news conference.
Panasonic, the maker of Viera flat TVs and Lumix digital cameras, raised its full-year operating profit forecast by 60 percent and posted a first profit in three quarters on robust sales of advanced DVD recorders and appliances.
LCD maker Sharp posted its first quarterly profit in a year as TV and screen panel demand recovered, but a 15 percent fall in overall sales and a cautious company outlook means strong earnings growth remains elusive.
Toshiba, Japan's biggest chipmaker, said its semiconductor operations sprang back to a quarterly profit on cost cuts and more stable prices, and it aimed to lift its annual outlook.