Souped-up Samsung Galaxy promises more pressure on iPhone

Galaxy Note

While Apple relies on just the iPhone, Samsung’s phone lineup includes cheaper models with basic features. It also has the Galaxy Note, a cross between a phone and a tablet that lets people write on the screen. Even though Apple released a smaller iPad tablet last year, it doesn’t have a direct competitor to the Note, which is sometimes called a “phablet.”

In all, Samsung sells about a quarter of all mobile phones globally, according to research firm Strategy Analytics. It shipped 213 million smartphones in 2012, compared with 135.8 million for Apple and 35 million for Nokia Oyj.

The company boosted fourth-quarter profit by 76 percent to 7.04 trillion won ($6.4 billion) as its mobile-phone unit more than doubled operating profit. In the same period, Apple reported profit that was little changed from a year earlier.

Samsung’s stock has outperformed Apple shares as well, especially in the past year. Samsung has gained 25 percent in the trailing 12 months, compared with a 22 percent decline for Apple. The Standard & Poor’s 500 information technology index has gained less than 1 percent during that period.

Samsung’s Premium

Investors are buying Samsung’s shares at a 3 percent price- to-earnings premium over Apple. That’s a reversal: For most of the past five years, Apple was the one with a premium.

Samsung is counting on mobile phones to continue driving earnings, especially as it contends with falling prices in its TV business and a stronger Korean currency.

“We expect handsets to remain its biggest source of growth,” Dohoon Lee, an analyst at CIMB Group Holdings Bhd in Seoul, said this month in a report. He recommends buying Samsung shares. “We expect Samsung’s flagship models to enjoy snowball effects, taking further market share at the high end.”

JJ Park, an analyst at JPMorgan Chase & Co., predicts the S4 will be a catalyst for Samsung’s share price. The company is likely to ship 70 million to 80 million units by the end of this year, he said in an e-mail.

This week’s event may give a sense of how many of those sales come from the U.S., where the allegiance to the iPhone remains strong, said Warren Lau, an analyst at Kim Eng Securities Ltd. in Hong Kong.

“Consumers in North America are still very much drawn to iPhones,” he said. “Samsung has chosen Radio City Hall in New York City -- a premier location in Manhattan which can house 5,000 people. This is a pretty big deal.”

Bloomberg News

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