| From: Eric L | 11/3/2013 10:09:55 AM | | | | | | Samsung to hold a rare analyst day on Wednesday ...
"Though the share price has recovered [from an early June through mid-July slump], Samsung is trying to address lingering concerns in the market. It has invited 350 analysts and institutional investors to a special meeting Wednesday at a Seoul hotel for a rare gathering with the company’s top management. While other big technology companies routinely hold such sessions, it is Samsung’s first “analyst day” since 2005, and only its second one ever."
>> Samsung Prepares to Slowly Lift a Curtain to Investors
Eric Pfanner
The New York Times (Tokyo))
November 3, 2013
nytimes.com
Secrecy has served Samsung Electronics well. Keeping its rivals guessing has helped the company, a South Korean technology giant, build a formidable lead in the smartphone industry, where it now sells more than one in three handsets worldwide.
This summer, however, Samsung suffered from an unusual loss of confidence among investors – caused in part by uncertainty over the company’s strategy and questions over what it intends to do with the $50 billion cash pile it has built up by selling all of those Galaxy S4’s and Note 3’s, as well as the chips inside them. From early June through mid-July, Samsung’s stock lost about one-fifth of its value.
Though the share price has recovered, Samsung is trying to address lingering concerns in the market. It has invited 350 analysts and institutional investors to a special meeting Wednesday at a Seoul hotel for a rare gathering with the company’s top management. While other big technology companies routinely hold such sessions, it is Samsung’s first “analyst day” since 2005, and only its second one ever.
“In the past they thought it was enough just to have rising earnings,” said Byun Han-joon, an analyst in Seoul for KB Investment & Securities. “Now they realize they need to be more investor-friendly.”
Company officials, including the chief executive, Kwon Oh-hyun, are scheduled to take to the stage of the Dynasty Hall of the Hotel Shilla – owned by another company in the Samsung industrial group – for a full day of presentations ranging from the company’s financial situation to the outlook for mobile phones, memory chips, display screens and other product areas.
“It will be a great chance to give investors better understanding on Samsung and to discuss its latest strategy and vision for 2020,” the company said in a statement.
Foremost in many investors’ minds is the future of the smartphone business, which provides about two-thirds of the company’s earnings. The summer sell-off was caused by concerns that smartphones were about to become commoditized. As differences in design and technology became less pronounced, companies like Samsung and its archrival, Apple, might lose their ability to charge a premium for high-end models, which now provide most of the profit in the industry. Apple faced similar worries.
After Samsung reassured shareholders with two strong quarterly financial reports, its stock price rebounded, and it is now back near its highest levels. While smartphones remain highly profitable, the company is also benefiting from a recent surge in the price of memory chips.
Samsung is the biggest maker of memory chips, accounting for about one-third of global output. It also makes display screens and other key components of smartphones. This separates it from Apple, which outsources the purchase of smartphone parts and their assembly, as well as other phone makers that have fallen on hard times, including BlackBerry, Nokia and HTC.
“There is still a perception gap around the Samsung model and how they can keep making money while all the others are crashing down,” said Sundeep Bajikar, an analyst at Jefferies, a brokerage firm, who is based in San Francisco.
Rather than crashing down, many analysts say, Samsung will continue to make a lot of money, with semiconductors contributing a growing share of earnings. Now investors want to know what Samsung intends to do with all that cash.
Mark Newman, an analyst in Hong Kong for Sanford C. Bernstein, predicts that the company’s cash pile will soar to about $77 billion next year and $160 billion in 2017. Apple, by comparison, currently has $147 billion in cash.
Yet investors have been seeing precious little of it. The percentage of net income that Samsung has paid out in the form of dividends or stock buybacks fell to 5 percent last year from 50 percent in 2004, Mr. Newman wrote in a note to investors.
That is one reason, he maintains, why the company’s stock price has lagged. Despite the recent rebound, Samsung trades at a significant discount to Apple, in terms of price-earnings ratios. It has less than half the market value of Apple, despite higher revenue.
In the run-up to the Samsung analyst meeting, Mr. Newman surveyed institutional holders of Samsung stock to gauge their support for several possible ways of rewarding investors: increasing the dividend, conducting a one-time share buyback, making repeated buybacks or combining all of these methods.
That might sound a bit like asking a child whether it would prefer chocolate, strawberry or vanilla ice cream, or a combination of the three. (Investors responding to the survey favored higher dividends and the Neapolitan option by roughly equal percentages.) Mr. Newman said such moves could drive up the share price significantly.
“The company needs to either return cash or convince investors of the next profit driver after memory – preferably both,” he said.
Others say it would be smarter for Samsung to keep its money and use it to invest in semiconductors, a highly capital-intensive business, and in other potential growth areas.
“I think their dollars or won are best invested in disrupting their competition,” Mr. Bajikar said.
Some analysts say another reason for Samsung’s lagging stock price is the fact that the shares are listed in South Korea, where they make up close to one-fifth of the value of the Kospi stock market indicator. Unlike other big international technology companies, including Sony and Panasonic of Japan and LG Display of South Korea, Samsung does not offer American depositary receipts, which provide a way for investors to trade shares on United States stock markets.
A stock listing in the United States could make it easier for individual investors who like Galaxy phones to buy a stake in the company that makes them. But it would also create new regulatory and disclosure requirements. And with an American listing Samsung might attract greater scrutiny from investors like Carl C. Icahn, who is trying to persuade Apple to buy back $150 billion in stock.
Analysts say they do not expect any big announcements along these lines from Samsung at the analysts’ day. During interviews, executives frequently cited the company’s long-term approach as a virtue, saying they paid little attention to short-term swings in the stock price. But the company acknowledged that secrecy has its limits.
“Samsung will continue to look for ways to be more open to shareholders,” it said in its statement on the analysts’ day.
- Eric L. - |
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| From: Eric L | 12/15/2013 11:15:29 AM | | | | | | The New York Times on Samsung Electronics Today ...
... and going forward.
>> Samsung: Uneasy in the Lead
Eric Pfanner And Brian X. Chen
The new York Times
December 14, 2013
nytimes.com
Lee Kun-hee, the man who built the most successful, most admired and most feared business in Asia — a $288 billion behemoth that is among the most profitable in the world — had a message for his employees this year: You must do better.
At other companies, congratulations might have been in order. His companies were headed to another extraordinary year. But this was Samsung, the South Korean industrial group that Mr. Lee, an elfin man with a stubborn will, transformed from a second-rate maker of household appliances into a conglomerate with a flagship electronics business that has left most rivals eating its silicon dust. There would be no pat on the back for Samsung’s 470,000 employees. Instead, in June, he sent a companywide email sternly urging them to raise their game.
“As we move forward, we must resist complacency and thoughts of being good enough, as these will prevent us from becoming better,” Mr. Lee, who is 71, wrote. Samsung’s management, he said, “must start anew to reach loftier goals and ideals.”
Two decades earlier, having taken over the company from his father, Mr. Lee met with dozens of his executives and gave them a similar order, one that remains embedded in company lore: “Change everything but your wife and children.”
That message was effective. Samsung’s sales are equal to about one-quarter of South Korea’s economic output. Samsung Electronics, the flagship, posted $190 billion in sales last year — about the same sales as Microsoft, Google, Amazon and Facebook combined.
Last year, Samsung shipped 215 million smartphones, about 40 percent of the worldwide total, analysts estimate; this year, it is expected to ship more than 350 million. Interbrand, a marketing consulting firm, ranked Samsung as the eighth-most-valuable brand in the world. Mr. Lee is one of the world’s richest men.
The company’s sweet spot has become electronics: It makes chips, display panels and many other electronic parts, and then assembles its own smartphones and other devices.
This kind of vertical integration has fallen out of fashion in the West, where it is considered unwieldy. While Apple designs its hardware and software, for example, the company buys chips from other companies, including Samsung, and outsources the assembly of iPhones, iPods and iPads.
But many years ago, Mr. Lee prodded his lieutenants to see the company’s deep reach into the supply chain as a competitive advantage, not a burden. So far, it has worked for Samsung.
“I don’t think people realize how effective a machine Samsung is in terms of how quickly they can turn around products in response to market change,” said Chetan Sharma, an independent analyst who advises mobile carriers.
So why the crabby email? What on earth is Lee Kun-hee so worried about?
The Ultimate Follower
Mr. Lee is worried about what might be called the fast-follower problem. Samsung is a well-oiled machine: If it spots a trend and decides to compete, it can outspend and outpace practically anyone. Its everything-included, research-to-manufacturing-to-marketing model allows it to obliterate the competition.
But Samsung has become so good at executing that few moneymaking areas exist where it doesn’t already dominate, particularly in electronics.
Suddenly, the company is the leader, with the onus of creating the next trend.
“If you are on the peak and looking where to go next — this is something new for them,” said Chang Sea-jin, author of “Sony vs. Samsung: The Inside Story of the Electronics Giants’ Battle for Global Supremacy.”
“In the past, they didn’t need a strategy because they always had somebody to look up to,” he said.
Smartphones have been the major driver of Samsung’s growth in recent years, and it doesn’t take the instincts of Mr. Lee to grasp the fleeting nature of mobile phone leaders. The brands that plunged after reaching the summit are etched in the minds of everyone at the company: Motorola, Ericsson, HTC, Nokia, BlackBerry.
Moreover, upstarts from China are gaining ground with smartphones that cost hundreds of dollars less than Samsung’s popular Galaxy S4 or an iPhone. Some of those Chinese brands have growing export ambitions; one, Xiaomi, recently hired a top Google executive, Hugo Barra, to lead its international expansion.
“There’s a feeling of elation and paranoia at Samsung — ‘Look at how well we are doing, and look at what might happen,’ ” said Benedict Evans, an analyst at Enders Analysis in London.
So Mr. Lee is pushing the company to think more boldly. Developing new products is no longer enough; Samsung wants to create devices that define whole new categories. And it wants to develop the software that makes them work, something it has mostly left to others.
Much of that work is happening in Digital City, the Samsung Electronics headquarters campus at Suwon, about 25 miles south of Seoul. Like all things Samsung, Digital City is massive: the size of 320 football fields, with room for 40,000 workers, not to mention the biggest parking lot in Asia. Inside its walls are many of Samsung’s most tightly guarded secrets. The inner sanctum is R5, a pair of new 27-story, glass-sheathed office towers, where the company’s mobile research and development program resides.
The R5 workers who pile into the building favor colorful polo shirts and dresses over the traditional Korean business uniform of black suit and white dress shirt, but R5 is all business. Samsung Electronics is expected to spend nearly $11 billion on research and development this year. This is where Samsung is plotting how to stay at the top of the lucrative electronics market.
A few months ago in an R5 conference room, Lee Young-hee, head of marketing for the mobile division, showed off some new products to The New York Times, including a new version of Samsung’s Galaxy Note smartphone and a new smartwatch, the Galaxy Gear. This was before the devices were introduced to the public, but the real revelation was the talk about Samsung’s overarching strategy.
“We would like to create a new trend,” Ms. Lee said. “If you wear Galaxy Gear, it’s a cool thing for young people.”
Ms. Lee is one of the important actors in the plot to change Samsung’s reputation. A stylish former executive at the cosmetics company L’Oréal, she wears colorful eyeglasses and a bobbed haircut. Her English is sharp. She speaks in animated fashion about the future of mobile technology and Samsung’s role in that future — sometimes to the point that her public relations aides remind her to be more discreet.
“We will make all the celebrities and important people wear it,” she added, tongue slightly in cheek. “If you don’t wear it, you will be obsolete.”
Before Samsung assumes that role, though, the company must shake its lingering reputation as a fast follower.
Samsung executives bristle at the notion that its products are imitations. Yet many of them acknowledge that their company followed Apple into smartphones.
Legal decisions have underscored that reputation. Apple has successfully argued in one major case in California that Samsung infringed on a series of its patents, and now Samsung must pay Apple $930 million in damages. Both companies are set to go to trial in California again in March, for a case in which Apple accuses Samsung of infringing on a separate set of patents on newer Samsung devices.
Devices like the Galaxy Gear smartwatch are meant to position Samsung as a trendsetter, not a follower. Apple has been working on such a device, according to people briefed on the project, and it has registered “iWatch” as a trademark. But it has yet to show off a device bearing that name. With Galaxy Gear, Samsung beat Apple to the market.
Galaxy Gear “bridges the gap between the mobile device and fashion worlds to create truly wearable technology,” J. K. Shin, who heads the Samsung mobile division, said before the device was released.
But Samsung is finding that setting trends is not so easy. The company put its full resources behind the watch, making a major marketing push with slick TV ads showing smartwatch-like devices used in movies and television shows by characters like James Bond. But the ads received a far better reception than the device itself. Technology reviewers largely panned it, criticizing its design and software features, and questioned why it existed at all.
Sales have been a bit better. Samsung said it shipped 800,000 of the watches in their first two months in stores, more than it expected. But how many of the shipped devices were sold to consumers remains unclear, and although analysts say Galaxy Gear has been the best-selling smartwatch on the market, no other smartwatch has had huge sales, either.
The company has struggled with other flashy new products, too, like televisions with curved screens that use organic light emitting diode, or OLED, technology.
Samsung is “certainly impressive from a technology perspective, and they may even be leading edge,” said Ross Rubin, a consumer technology analyst for Reticle Research, “but very often they just seem to be flashy-gimmicky, or technology for technology’s sake.”
Those struggles — along with the intensifying smartphone competition — have disappointed investors. Shares of Samsung Electronics fell this summer before ticking back up. In a move to appease shareholders, last month the company told investors at a special meeting in Seoul that it would raise its dividend. Shares actually slipped on the news — investors had hoped for more — and they have barely budged since then.
A Dependence on Android
Technology analysts and consumers often compare Samsung to Apple. But the elephant in the room in any discussion of the Korean giant is another American technology company: Google.
The vast majority of Samsung’s phones run on Android, Google’s operating system. Together, Samsung and Google have quickly taken over the global smartphone market. In the third quarter of the year, Android was installed on 81 percent of the mobile phones shipped worldwide, according to IDC, a research firm. That compared with 12.9 percent for Apple’s iOS and 3.6 percent for Windows, the nearest rivals.
“Google created a product that helped Samsung make more money than all of Google,” said Horace Dediu, an independent analyst in Helsinki, Finland.
That has been great for Samsung so far, but the downside is that the company has become more and more reliant on Google’s software. As Samsung rode to the top of the mobile phone industry strapped to Android, the company sacrificed a degree of control over its mobile destiny.
More and more, smartphone hardware looks similar — glass touch screen, nice camera, a few buttons. That has often made the mobile operating system, apps and services — along with “soft” elements of the hardware, like the design and the user experience — the more important distinguishing factors.
“When someone buys our handset, we want them to be interested in the whole experience,” said Hong Won-pyo, president of the Media Solution Center, the content and services arm of Samsung Electronics. “Combining excellent hardware innovation and software innovation — when you combine them neatly, the value will be maximized and the consumer will appreciate our products because we integrated them.”
The combination of seamless hardware and software has been a crucial part of Apple’s success. Once a user is dialed into Apple’s system, it is hard to leave it for something else. Switching to an Android phone from an iPhone results in losing access to Apple’s exclusive software, like its free text-messaging service, iMessage, or the plethora of third-party apps made only for iPhones.
This gives Apple the advantage of what some analysts call “lock-in” — an advantage that Samsung doesn’t enjoy with Android, because Samsung users can always switch to another Android phone, like one made by Motorola, and get many of the same features.
For several years, Samsung has been conducting research on mobile operating systems. Last year, Samsung merged that work with an industry project called Tizen, whose partners include Intel and other technology and telecommunications companies. Samsung is expected to introduce phones running the Tizen operating system soon, in partnership with mobile operators like NTT Docomo of Japan.
While there has been speculation that Samsung’s alliance with Tizen is a move to distance itself from Google, the company says it is merely trying to provide consumers with a range of alternatives.
“I don’t think they can be a dominant smartphone operating system in the near term,” said a former Samsung executive who insisted on anonymity to protect business relationships. “But it’s an important step for Samsung to take at the moment. If they want a new success story, they will have to focus on the software side of things.”
Tapping Into Silicon Valley
One of the people behind Samsung’s new software focus is David Eun, an outspoken Korean-American executive who has worked at AOL and Google. About a year after he joined Samsung Electronics in 2011, Mr. Eun suggested that some top Samsung executives fly over from South Korea for a road trip in Silicon Valley to visit companies in the world’s software mecca.
“This was about trying to understand what makes these people tick in Silicon Valley,” said Mr. Eun, 46, an executive vice president.
The road trip proved illuminating. Samsung decided it needed a stronger presence in Silicon Valley if it truly wanted to compete in software and Internet services.
Soon afterward, Lee Kun-hee, in perhaps his most ambitious undertaking yet, began trying to bring a bit of the culture of Silicon Valley to Samsung. In February, Samsung announced its Open Innovation Center, with offices in South Korea, California and New York. In the office in Mountain View, Calif., which is set up in a small two-story office building next to the Caltrain commuter rail station, Samsung employees search for start-ups to invest in, team with or acquire.
In July, the company bought Boxee, a start-up that made an entertainment box with smarter television software. A partnership with Flipboard, the popular news-reading app, came through the Open Innovation Center. Now Flipboard comes installed on Samsung’s flagship smartphones in the United States.
Mr. Eun also runs something called the Samsung Accelerator program, which opened in July in Palo Alto, Calif., and in September in Chelsea, the Manhattan neighborhood where many tech start-ups have sprouted. Samsung acts as the lone investor for start-ups in the program, treating their workers as its own employees, with full benefits, legal resources and insight into Samsung’s product road maps. In exchange, the start-ups make their products exclusively for Samsung.
The Silicon Valley and accelerator programs suggest that Samsung is serious about embracing the creativity and collaborative spirit necessary for software development, and going wherever those creative minds live. But the big decisions will still be made in Suwon or Seoul, where a number of companies in the Samsung group have their headquarters.
“It’s still very much a Korean company, with a very Korean mind-set,” said Mr. Chang, the author of “Sony vs. Samsung.” “It’s all about speed, efficiency and cutting the cost of production, none of which have anything to do with creativity.”
Samsung’s innovation drive coincides with a push by President Park Geun-hye to promote entrepreneurship and creativity. In her election campaign last year, she promised to bring “economic democratization” to South Korea.
That could be a tall order. The 30 biggest chaebol, or Korean conglomerates, accounted for more than 80 percent of South Korea’s exports in 2010, according to the Federation of Korean Industries. All of them — like Hyundai and LG — have built up their production muscles over time, and Samsung is the biggest of the bunch.
Chaebol like Samsung were encouraged to grow in the 1960s and 1970s, under President Park’s father, the authoritarian ruler Park Chung-hee. In an effort to industrialize the economy after the devastation of the Korean War, the government provided cheap loans and favorable regulations. And until the financial crisis of 1997, South Korea was the leading example of Asia’s so-called tiger economies.
Loosening the grip of the chaebol and the powerful families behind them, however, will not be easy. Since 1987, when Lee Kun-hee succeeded his father as chairman, he has led Samsung for all but two years. And Mr. Lee is expected to give control eventually to his son, Lee Jae-yong, who is a vice chairman of Samsung Electronics.
So far, deeply embedded Confucian values like a respect for family, tradition and hierarchy have helped Samsung play catch-up by instilling discipline and dedication in its workers. What remains to be seen is whether those same values will prevent the company from stepping outside the pack. Mr. Lee acknowledged as much in his June email exhortation: “We must create an environment of ingenuity, where autonomy and creativity abound.”
Of course, no one blames the rigidity of Finnish or Canadian values for the downfall of Nokia or BlackBerry. Those companies were simply blindsided by Apple. Samsung was, too, but it managed to accomplish something the others did not — it bounced back, stronger than ever.
And one thing is certain: No matter what, Mr. Lee will find reasons to worry — and his employees will hear about it. ###
- Eric - |
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| From: JakeStraw | 5/12/2017 2:41:25 PM | | | | | | I tried using the latest Samsung smartphone to replace my work computer — now I'm convinced it's the future
cnbc.com
The Galaxy S8 DeX Station lets you use your phone as a computer. |
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