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Samsung to post record quarterly profit on Galaxy boost

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The Samsung Galaxy Nexus smartphone

© PA Images / Kin Cheung/AP

Samsung Electronics has said that it expects profit for the first three months of 2012 to have nearly doubled as sales of its smartphones continue to soar.

The Korean company expects to report an operating profit of 5.8tn won (£3.2bn) for the first quarter of this year, largely due to the continued success of its Galaxy line of mobile devices. Quarterly sales were estimated at 45tn won.

Analysts believe that Samsung's first quarter revenue was in line with expectations, but improved margin on smartphones has delivered the surprise increase in profits.

Choi D-Yeon, of LIG Investment & Securities, told the BBC: "There was a big surprise in profit, while revenue was in line, which suggests a stronger-than-expected profit margin from the handset division thanks to robust sales of high-end models like the Galaxy S and Note.

"Handset margins are estimated to have topped 20% and profits from the division also topped 4tn won."

Samsung will release its full earnings report on April 27.

The company is widely expected to have outpaced Apple in handset sales in the first quarter, after the US firm regained the smartphone top spot in the final three months of 2011 on the back of strong sales of the iPhone 4S.

But while Samsung's phone division has prospered, the company's other operations, particularly the memory chip manufacturing unit, have suffered a harder time.

Oversupply has hit global prices for memory chips, while natural disasters in Japan and Thailand last year also resulted in delays in the production of electrical goods that use the chips.

However, the market is recovering and prices are climbing, meaning chips are expected to play a major role in Samsung's second quarter earnings.

Another Samsung division that has struggled is its LCD business, although the firm recently addressed that by officially spinning off the unit as Samsung Display, now the biggest maker of displays in the world.

Samsung is expected to introduce the new Galaxy S3 smartphone in May, the follow-up to the 20m-selling and critically-acclaimed Galaxy S2.

The high-resolution new S3 is likely to be a key rival to Apple's next generation of the iPhone, which may be introduced in June, or later in the year.

Lee Ka-keun, of Hana Daetoo Securities, said that should both smartphones arrive in the second quarter of this year, it will trigger a "full-fledged war" between the two firms.

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