CEO re­signs as bribery scan­dal rocks Samsung

In­ter­nal cri­sis has so far spared the tech gi­ant’s record prof­its, sales

The Daily Star (Lebanon) - - BUSINESS -

SEOUL: The chief ex­ec­u­tive of Samsung Elec­tron­ics re­signed Fri­day, say­ing the South Korean tech gi­ant was fac­ing an “un­prece­dented cri­sis’ even as it flagged record third-quar­ter prof­its.

Kwon Oh-Hyun’s res­ig­na­tion comes as the com­pany strug­gles to over­come a bribery scan­dal that sent Lee Jae-Yong, its de-facto head and heir to the Samsung em­pire, to jail.

“As we are con­fronted with un­prece­dented cri­sis in­side out, I be­lieve that time has now come for the com­pany [to] start anew, with a new spirit and young lead­er­ship to bet­ter re­spond to chal­lenges aris­ing from the rapidly chang­ing IT in­dus­try,” Kwon said.

“For­tu­nately, the com­pany is now pro­duc­ing best-ever re­sults but this is merely a fruit of de­ci­sions and in­vest­ment made in the past,” he said in a state­ment.

South Korea’s largest com­pany has been seek­ing to move past a bribery scan­dal that saw Lee thrown into jail, and to over­come a dam­ag­ing re­call last year of its flag­ship Galaxy Note 7 smart­phone over ex­plod­ing bat­ter­ies.

Lee, who was found guilty in Au­gust of bribery, per­jury and other charges re­lat­ing to pay­ments made by Samsung to the se­cret con­fi­dante of ousted pres­i­dent Park Geun-Hye, is ap­peal­ing his five-year sen­tence and says he is in­no­cent.

Kwon’s sud­den de­par­ture may be a cal­cu­lated le­gal tac­tic to seek a softer pu­n­ish­ment for Lee, said Shim Jung-Taik, an au­thor of sev­eral books onSam­sun­gan­ditscor­po­rate­cul­ture.

“Lee’s lawyers may ar­gue that Samsung, with the vet­eran Kwon gone, needs its vice chair­man back more than ever to lead the firm,” he said, adding that the tac­tic had often been used by other fam­ily-run South Korean busi­ness em­pires.

One an­a­lyst who de­clined to be named said the de­par­ture of the 64year-old Samsung vet­eran may sig­nal a broader reshuf­fle at the top.

“Samsung’s CEO-level lead­er­ship has re­mained largely un­changed for past three years, which is like an eter­nity in the fast-chang­ing tech in­dus­try,” the an­a­lyst said.

The group has not made any rad­i­cal changes in its lead­er­ship since 2014 when the cur­rent chair­man Lee Kun-Hee suf­fered a heart at­tack that left him bedrid­den.

PROF­ITS UP

Fri­day’s per­son­nel an­nounce­ment came shortly af­ter the com­pany said it was ex­pect­ing to log 14.5 tril­lion won ($12.8 bil­lion) in op­er­at­ing prof­its for the July-Septem­ber quar­ter, an all-time record and nearly three times the 5.2 tril­lion won of the same pe­riod a year ear­lier.

Sales are ex­pected to have surged 29.65 per­cent year-on-year to 62 tril­lion won, with the boom­ing semi­con­duc­tor busi­ness boost­ing the com­pany’s bot­tom line.

Samsung did not an­nounce the per­for­mance es­ti­mates of each busi­ness di­vi­sion but its semi­con­duc­tor busi­ness is widely be­lieved to have con­trib­uted greatly to the record­beat­ing re­port.

The com­pany is set to re­lease its fi­nal earn­ings re­port on Oct. 31. “The re­sults are good ones that largely meet mar­ket ex­pec­ta­tions,” Kwon Sung-Ryul of Dongbu Se­cu­ri­ties told AFP. “The com­pany has been rid­ing a global semi­con­duc­tor boom,” he said, adding the semi­con­duc­tor busi­ness alone is be­lieved to have con­trib­uted 10 tril­lion won to the op­er­at­ing profit.

The com­pany’s main prod­ucts – DRAM and NAND mem­ory chips used in smart­phones – have also seen an in­crease in ship­ments and prices.

Ris­ing sales of its flag­ship Galaxy S8 and Galaxy Note 8 smart­phones were also be­lieved to have bol­stered the prof­itabil­ity of the mo­bile di­vi­sion, an­a­lysts said.

Yon­hap In­fo­max data, based on re­search from 21 se­cu­ri­ties firms, also showed Samsung is ex­pected to post an op­er­at­ing profit of 16 tril­lion won in the fourth quar­ter, up 74 per­cent from a year ear­lier.

Doh Hyun-woo, an­a­lyst at Mi­rae As­set Dae­woo Se­cu­ri­ties, said in a re­port that the re­lease of new mod­els, in­clud­ing Ap­ple’s iPhone X, could weigh on Samsung’s mo­bile sales, but will also help its smart­phone parts busi­ness.

The con­sumer elec­tron­ics di­vi­sion will also ben­e­fit from strong sea­sonal de­mand, he added.

An­a­lysts said the com­pany was likely to post another all-time high quar­terly op­er­at­ing profit of some­where be­tween 15 and 17 tril­lion won in the Oc­to­ber-De­cem­ber pe­riod as IT/mo­bile busi­ness is ex­pected to con­trib­ute greater earn­ings as well.

Shares in Samsung Elec­tron­ics closed 1.46 per­cent down Fri­day on heavy profit-tak­ing. –

Lee main­tains his in­no­cence and is ap­peal­ing his five-year sen­tence.

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