Samsung Electronics 2Q Profit Declines

Employees of Samsung Electronics Co. sit under a formative arts made with Samsung logos at its headquarters in Seoul, Friday, July 13, 2007. Samsung Electronics Co. said Friday that second-quarter net profit fell 5 percent, amid price declines for its mainstay computer memory chips.(AP Photo/Ahnn Young-joon) (Ahn Young-joon - AP)

SEOUL, South Korea -- Samsung Electronics Co. said Friday that second-quarter net profit fell 5 percent from a year ago on price declines for its mainstay computer memory chips, but expressed confidence of a rebound in the market.

The company's shares surged 6.4 percent to 687,000 won ($749) amid investor expectations for stronger business performance later in the year as well as on a news report that U.S. investor Carl Icahn may be considering a bid for the company.

Samsung, the world's largest computer memory chip manufacturer, earned 1.42 trillion won ($1.55 billion) in the three months ended June 30, the company said in a statement. Sales rose 3.6 percent during the quarter from the same period last year.

"We are very, very optimistic about the second half, very sanguine in our outlook," Chu Woo-sik, executive vice president and head of Samsung investor relations, told analysts on a conference call. "We are in fact expecting all of our major businesses to experience very high level of demand recovery starting from Q3."

While the company doesn't release quarterly earnings forecasts, investors are betting on that optimistic outlook.

The profit result, the third straight quarterly decline, was better than expected. The average estimate of nine analysts surveyed by Dow Jones Newswires forecast that Samsung would post a net profit of 1.33 trillion won ($1.45 billion).

Computer memory chip prices fell sharply in the second quarter amid oversupply. Prices and supply conditions are highly seasonal, with demand usually strongest in the final two quarters of the year when demand for personal computers traditionally picks up.

Samsung manufactures both DRAM, or dynamic random access memory, chips used in personal computers, as well as NAND chips used in digital cameras, music players and mobile phones.

DRAM chip prices slid 52 percent from the same period the year before and 36 percent from the previous quarter, according to Dongbu Securities' semiconductor industry analyst Lee Min-hee. NAND prices fell 57 percent year on year, but rose 17 percent from the first quarter, he calculated.

Chu said that Samsung expects "very strong" DRAM demand, driven by sales of computers equipped with Microsoft Corp.'s Vista operating system.

He added that Apple Inc.'s introduction of the iPhone is spurring other handset makers to bulk up their music phones with more NAND flash to compete.

"In the case of NAND the picture is also quite rosy," he said.