Samsung reports first-ever quarterly loss

Samsung Electronics of South Korea on Friday echoed the technology sector gloom foreshadowed Thursday by LG Electronics, Nokia, Sony and Microsoft, when it reported its first-ever quarterly loss, helping to send Asian stock markets lower.

The world's biggest manufacturer of memory chips and liquid crystal displays has been badly hit by a collapse in demand and price pressures in those segments. It reported Friday an operating loss of 937 billion won, or $672 million, for the October-December quarter compared with a 1.78 trillion profit during the same period a year earlier. The loss was below what analysts had expected. But Samsung finished the quarter with a net loss of 22.2 billion won.

The net loss - Samsung's first since the company began reporting results on a quarterly basis in the third quarter of 2000 - underlines the challenges facing electronics companies worldwide as major economies flounder in recession. The Suwon, South Korea-based company has struggled with falling prices for chips and flat screens, as well as the waning consumer appetite that has hit other Asian electronics manufacturers including Japanese giant Sony Corp.

"The global economic slowdown had an adverse effect on consumer purchases of electronics goods in the fourth quarter, traditionally a strong period for electronics companies," Samsung said in the release.

Sales at Samsung's chips division last quarter fell 18 per cent from June-September, and LCD sales declined 12 per cent, showing how rapidly the financial crisis and credit squeeze has prompted companies and consumers to rein in spending.

On the bright side, Samsung said mobile phone sales rose to a record during the quarter despite a 5 percent contraction in the global market for handsets. The company, the world's No. 2 mobile phone manufacturer, sold about 200 million handsets in 2008, an increase of 22 per cent from 2007. (See: Nokia posts 69 per cent profit drop in fourth quarter, loses market share to rivals)

LG Electronics, which makes mobile phones and flat screen televisions, swung to its first net loss in seven quarters and said Thursday that it expected sales and profitability to decline further this year. Nokia, the Finnish cellphone maker, reported Thursday a sharper fall in profits than analysts had projected and said it expected global cellphone sales to fall another 10 per cent.

Microsoft announced the first significant lay-offs in its 34-year history after reporting a slump in profits for the quarter that ended December. The company plans to lay off 5,000 employees, or 5 percent of its work force. Sony announced after the close of trade in Tokyo on Thursday that it expected to report a loss of $3 billion for the 12 months ending in March. Sony shares on Friday reacted with a 6.2 per cent plunge, helping to send the Nikkei 225 stock share down 2.3 per cent. (See: Microsoft pink-slips 5000 staff, despite profits)

On Thursday, Sony projected its first annual loss in 14 years, while South Korea's LG Electronics Inc. reported a record quarterly net loss. Japan's Panasonic Corp. said earlier this month it would slash about $1.5 billion from its planned investment in two new flat-screen TV plants and shut down unprofitable businesses.(See: Panasonic to reduce investments in flat screen televisions)

With no improvement in the global economy expected until much later this year, at the earliest, companies like Samsung, Sony and automakers around the world are set for an even tougher time in this quarter forcing many into painful cost cuts and restructuring.

More bad news is expected in coming weeks as companies like Toyota and Toshiba release their earnings.