Samsung Loses The Top Spot

Last quarter Samsung became the leading vendor of smartphones, but its reign at the top was short-lived. Apple shot back to the top with record sales of 37.04 million iPhones in the quarter, and Samsung is close behind with an estimated 36.5 million smartphones sold.

Samsung Electronics (005930.KS) last week reported fourth quarter revenue of 47.3 trillion won ($42.1 billion), up 13% y-o-y. Net income rose 17% y-o-y to 4 trillion won ($3.56 billion). For the full year 2011, revenue was up 7% to an all-time high of 165 trillion won ($147 billion) and net income was down 15% to 13.73 trillion won ($12.2 billion).

Semiconductor segment sales in the quarter decreased 1% to 9.17 trillion won. Display Panel business sales increased 19%, and the Digital Media & Appliances businesses reported a 4% increase in sales to 17 trillion won.

Smartphone sales continued to be the main driver for revenue growth in the quarter. Telecom revenue reached a record 17.82 trillion won compared with 11.75 trillion won in the fourth quarter of 2010. Samsung’s flagship GALAXY S II smartphone and its full lineup of high-end mobile devices, such as the GALAXY Note and the GALAXY Nexus, along with entry-level models, drove up revenue for the year by almost 40% y-o-y. Shipments of Samsung smartphones rose approximately 30% q-o-q. Research firm Strategy Analytics says Samsung shipped 36.5 million smartphones in the quarter.

Evan Ramsted and Jung-Ah Lee of The Wall Street Journal point out that despite a 30% jump in smartphone unit sales, Samsung’s telecommunications business produced a smaller profit margin in the fourth quarter than in the third period, a sign that competitive pressure forced the company to accept lower prices.

Samsung might be neck-in-neck with Apple in shipments, but in terms of margins Apple is far ahead. The iPhone has an operating margin of 37.4% compared to Samsung’s 11%. Luckily for Samsung, it has its chip business to balance the act. Samsung makes the mobile processors for Apple’s iPhone and iPad. So, even though Apple leads the market, Samsung is still in a good position.

Meanwhile Motorola, which once ruled the smartphone market with its RAZR models, is nowhere near the top. The company is in the process of being acquired by Google for its treasure trove of cellphone-related patents, which Google expects will protect it from Apple and Microsoft lawsuits. The acquisition is expected to close in early 2012. Motorola recently filed a new lawsuit against Apple’s iPhone 4S and its iCloud storage system, alleging patent infringement for software and hardware. The patents in question related to wireless antennae, messaging, data filtering, and other software technologies.

Motorola Mobility (NYSE:MMI) recently reported fourth quarter revenue of $3.4 billion, up 0.3%%. Net loss was $80 million or $0.27 per share compared to net income of $80 million or $0.27 per share last year and a loss of $32 million or $0.11 per share last quarter. For the full year 2011, revenue was $13.1 billion, up 14% and net loss was $0.84 per share compared to $0.29 per share in 2010. Motorola Mobility ended the quarter with $3.6 billion in cash.

Home segment net revenue in the fourth quarter was $897 million, down 11%, and GAAP operating earnings were $57 million compared to $54 million last year. Set-top box shipments were down 3%.

Mobile Devices segment net revenue was $2.5 billion, up 5%, while GAAP operating loss was $70 million, compared to earnings of $72 million last year. During the quarter, Motorola Mobility shipped 10.5 million handsets, including 5.3 million smartphones and about 200,000 tablets. The stock is trading around $38.93 with market cap of about $11.6 billion. The 52-week range is $20.77 to $39.20.