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Samsung’s Profit Jumps Despite Note 7 Failure

January 23, 2017

Inside the Samsung Flagship Store Ahead Of 3Q ResultsInside the Samsung Flagship Store Ahead Of 3Q Results
Seongnam, South Korea—Wednesday, Oct. 5, 2016 SeongJoon Cho—Bloomberg via Getty Images

Samsung Electronics on Tuesday said fourth-quarter operating profit jumped 50% to its highest in over three years, as record earnings in its chips business masked the negative impact of its failed Note 7 phones.

Samsung also said it plans to buy back 9.3 trillion won worth of shares this year.

The South Korean electronics manufacturer is counting on the booming chip market to continue driving growth as it works to recover from its biggest product recall crisis involving fire-prone Note 7 smartphones.

Samsung expected earnings to decline in the current quarter from the preceding quarter because of “increased marketing expenses in the mobile business and a sales decrease of TVs due to weak seasonal demand.”

The world’s biggest maker of smartphones and memory chips said October-December operating profit was 9.22 trillion won ($7.93 billion), compared with prior guidance of 9.2 trillion won.

Revenue remained flat at 53.3 trillion won from the same period a year earlier, versus its estimate of 53 trillion won.

The chips division was the quarter’s cash cow, with operating profit jumping 77% to 4.95 trillion won from a year earlier.

In its mobile business, operating profit rose 12% to 2.5 trillion won as models such as the Galaxy S filled the void following the discontinuation of the fire-prone Note 7 in October.

Samsung said on Monday that defective batteries caused Note 7 handsets to overheat and catch fire, and indicated that it may delay the launch of its next premium Galaxy S smartphone.

But its shares have been resilient, hitting a series of record-highs this month despite the Note 7 fiasco and an ongoing investigation into Samsung executives over their alleged involvement in a political scandal.

Prosecutors have said they will pursue their bribery case against Samsung Group scion Jay. Y Lee even if they are not granted permission to arrest him.

($1 = 1,162.1900 won)

Jan. 23, 2017 (7:22 pm): This article was updated with additional information