 | ||||||
| A model poses with Samsung Electronics’ latest solid-state drive (SSD). SSD is the next-generation storage device that will replace conventional hard-disk drives. / Korea Times |
This strategy transition takes place as Samsung is pressured to better nurture its next earnings drivers amid stalling growth of its representative items such as smartphones, tablets and televisions.
With its Galaxy-branded smartphones and tablets as part of it armory, Samsung hopes to cut Apple’s firm lead in the respective segments, however, results have been subpar as the Korean technology giant suffers from flattening sales growth in key markets including North America, according to officials.
``Samsung will secure its bottom line with just chips and LCDs as it has controlling power in the cyclical component businesses, however, Samsung’s future is subject to the power of engagement in what’s next,’’ said a senior fund manager at a Europe-based investment bank in Seoul, asking not to be identified, Monday.
``Samsung is regarded as a fast-follower not as a market creator. What Samsung needs is to implement so-called `selection and concentration’-driven strategies,’’ he added.
As part of the strategy shift, Samsung is reportedly being told to sell its money-losing hard disk drive unit after the firm failed to yield valid returns, according to Samsung sources.
It’s known that Samsung is hoping to create some $1.5 billion in returns for the sale, though it may settle for less than $1 billion to abandon the venture.
``I think it’s a plausible scenario considering the rising popularity of NAND flash chip-embedded digital devices such as tablet PCs and even smartphones,’’ said So Hyun-chul, an analyst at a local brokerage of Shinhan Financial Investment, adding the price itself is attractive.
Impressed by the success of Apple’s iPad, the demand for hard-disk drives has fallen significantly as tablets and smartphones use more flash-memory chips rather than disks, which are commonly used in conventional laptop computers.
Last month Hitachi of Japan offloaded its hard disk division to Western Digital for about $4.3 billion.
Samsung is a second-tier player in the hard disk drives industry with market share at around 10 percent after Western Digital and Seagate, according to market research firms.
Samsung spokesman C.G. Song declined to confirm whether they plan to sell the division. Samsung generally declines to comment, especially on merger and acquisition (M&A) issues.
Desperate pitches
Samsung earlier said it has suffered a sharp fall in its quarterly earnings for the first three months of this year, hit by a weak LCD business and price competition in tablet PCs.
Heavily involved in volatile parts-related businesses, Samsung is battling with leading companies that include Motorola and Apple in highly-competitive consumer markets.
Such uncertainty led Samsung to recently announce a 23.3 trillion won (over $20 billion) investment plan by 2020.
Samsung identified biopharmaceuticals, solar-cells, secondary batteries for electric vehicles, light-emitting diodes (LED) and medical equipment as its ``next five’’ revenue sources.
More recently it formed a united front with U.S.-based biopharmaceutical firm Quintiles Transnational as part of an attempt to shy away from its heavy dependence on consumer electronics.
``I expect more follow-up measures because Samsung’s top decision-makers have already reached a broad consensus for the need for business realignment and M&A deals,’’ said a top Samsung source, asking not to be identified because he is not authorized to speak to the media.
Samsung has keen interests in strengthening its mobile platform called Bada to improve its deficient software capability, while it takes the chance to lift its once-neglected business sectors to the top globally under Samsung CEO Choi Gee-sung’s calls for ``1st place DNA.’’
Samsung’s abandoning of the hard disk drive business also makes room for the rise of next-generation storage devices called solid-state drives (SSDs).
SSDs are still expensive but the market is ready to take off thanks to the explosive growth of electricity- and memory-intensive digital gadgets and the gaining momentum in cloud-computing services.
Samsung is injecting more resources to maximize the ``first-mover’’ advantage in the SSD market. Both analysts and Samsung sources have told The Korea Times that the firm has been shipping SSDs to Apple, though Song of Samsung declined to confirm this, as was the case of Apple’s loquacious local representative Steve Park.
Apple recently released the upgraded MacBook Air lineup with larger SSDs and sources say Samsung’s chip plant in Austin, Texas, will ship more SSDs to its critical and simultaneous U.S. partner and rival.
``It’s been difficult to find more synergy with the existing memory chip business by sticking to the hard disk drive business. It’s more desirable for Samsung to completely outsource hard disk drives to cut costs and to spend the savings on SSDs,’’ said the Samsung source.
``If Samsung sells one of its non-core business units, then the hard disk drive business would be the right one to unload because the outlook is nebulous and the division lacks competitiveness,’’ added the source.
Samsung said the sale of its SSDs marked over 10,000 in the two months since being released in January.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.