Samsung surges past Apple in smartphones, upbeat on Q4

(Reuters) - Samsung Electronics Co overtook Apple Inc as the world's top smartphone maker in the July-September period with a 44 percent jump in shipments, and forecast strong sales in the current quarter in a clear warning to its rivals.

Samsung (005930.KS) only entered the smartphone market in earnest last year, but its sales have skyrocketed thanks to a sleek production system that rapidly brings new products to market. Apple (AAPL.O) introduced its first iPhone in 2007.

"In the handset division, Samsung has no real rival models to challenge its products except for the iPhone 4S. Apple and Samsung will continue to dominate the market in the fourth quarter," said Kim Hyun-joong, a fund manager at Midas Asset Management, which owns Samsung shares.

Profits from the South Korean firm's telecoms division, announced on Friday, more than doubled from a year ago to a record 2.5 trillion won ($2.2 billion) and accounted for 60 percent of Samsung's total profit, offsetting a plunge in earnings from its bread-and-butter memory chips.

Shipments of smartphones jumped 44 percent from the preceding quarter to 27.8 million units, up nearly four times from a year ago, according to research firm Strategy Analytics.

Apple's iPhone sales shrank by 16 percent to 17.1 million units in the third quarter. Samsung had 23.8 percent of the global smartphone market in the third quarter, 9 points higher than Apple. Samsung's flagship Galaxy line of products is powered by Google's (GOOG.O) Android software.

Apple sold fewer phones in the third quarter, missing street expectations for the first time in year, as customers held off buying iPhones until the October launch of the latest version.

Samsung shares were up 1.6 percent by 0500 GMT (1 a.m. EDT), versus a 0.6 percent gain in the wider market .KS11.

The world's biggest technology firm by revenue reported a 4.25 trillion won operating profit for the July-September quarter, broadly in line with its earlier estimate of 4.2 trillion won.

That was down from 4.9 trillion won a year ago but up from 3.8 trillion won in the preceding quarter.

Samsung said its fourth-quarter earnings could be better than the third, boosted by one-off gains from its $1.4 billion sale of its hard disk drive business to Seagate Technology (STX.O).

"I am cautiously optimistic on the fourth quarter outlook at this point," Robert Yi, head of Samsung's investor relations, told analysts.

"Looking ahead into the fourth quarter, when industry demand is traditionally at its peak, Samsung expects sales of mobile devices to remain strong and flat-panel TV shipments to increase," the company added in an earnings statement.

Apple, whose iPhone sales account for nearly half the firm's total sales, reported a 40 percent gross margin, or the percentage of sales left after subtracting the cost of goods sold. Samsung's phone division reported a 16.9 percent operating margin, which further takes account of marketing costs.

Nevertheless, Samsung faces challenges as the new iPhone introduced earlier this month is notching up strong sales.

Nokia is also fighting back with its first phones based on Microsoft's (MSFT.O) Windows software. And Sony Corp (6758.T) announced on Thursday it would take full ownership of its mobile venture, Sony Ericsson, in a bid to exploit its music and video library.

Samsung on Thursday announced the launch of its Galaxy Note mobile device, adding to the flagship Galaxy lineup of products. The device, powered by Android, will square off against a series of new models released by Apple, Nokia and HTC Corp (2498.TW).

The iPhone, introduced in 2007 with the touchscreen template now adopted by its rivals, is still the gold standard in the smartphone market.

Samsung may not have come up with the concept, but it has adopted Apple's breakthrough smartphone idea perhaps better than any other handset maker. It tries to offer the Apple experience at a better price with better functionality.

"Samsung's rise has been driven by a blend of elegant hardware designs, popular Android services, memorable sub-brands and extensive global distribution," said Alex Spektor at Strategy Analytics.

"Samsung has demonstrated that it is possible, at least in the short term, to differentiate and grow by using the Android ecosystem."

Q4 SEEN BETTER THAN Q3

Profits from Samsung's chip business more than halved to 1.59 trillion won, but the division held up well as its relatively high exposure to lucrative mobile chips helped the firm offset a sharp plunge in prices of commodity computer memory chips.

Samsung was the sole profitable firm among major global dynamic random access memory (DRAM) chip makers in the third quarter.

Second-ranked computer memory chip maker Hynix Semiconductor (000660.KS) and Japan's Elpida Memory (6665.T) swung to deep losses as prices of DRAM chips used in PCs tumbled about 50 percent in the third quarter.

Samsung's chip business is also benefiting from strong demand for mobile processor chips used in Apple's iPhone and iPad tablet as well as its own Galaxy smartphones.

Samsung expected demand for PCs to remain weak in the fourth quarter because of weak seasonality, while demand for mobile devices and servers will be relatively strong.

"I see some signs that chip prices have hit bottom as inventories are running out. However, we don't yet know when the industry is going to pick up since macroeconomic uncertainties overshadow the demand outlook," said Park Hyun, an analyst at Tong Yang Securities.

Samsung's display business posted losses for a third consecutive quarter on weak demand for TVs and PCs.

But losses narrowed from the previous quarter, helped by strong earnings from the OLED display, which is widely expected to replace LCD as the next-generation flat-screen in mobile devices and TVs.

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Apple's visionary Steve Jobs dead at 56

 Apple co-founder visionary Steve Jobs, who changed the daily habits of millions of people from different walks of life, by reinventing computer, music and mobile phones, died Wednesday at the age of 56.

Apple loses a visionary leader who inspired personal computing and iconic products such as the iPod, iPhone and iPad, which made Jobs one of the most significant industry leaders of his generation.

His death after a long battle with pancreatic cancer sparked an outpouring of tributes as world leaders, business rivals and fans alike lamented his premature passing and celebrated his monumental achievements.

"The world has lost a visionary. And there may be no greater tribute to Steve's success than the fact that much of the world learned of his passing on a device he invented," U.S. President Barack Obama said in a statement.

Fans paid homage to Jobs outside Apple stores around the world, from Los Angeles to Sydney. Outside one store in New York City, mourners laid candles, bouquets of flowers, an apple and an iPod Touch in a makeshift memorial.

In San Francisco, they held up black-and-white portraits of Jobs on their iPads. Some mourners in Tokyo held a sunset vigil, using apps on their iPads to show flickering candles on the screen.

Many websites, including Apple's own, were transformed into online memorials, a testament to the digital creativity that Jobs inspired.

"For those of us lucky enough to get to work with him, it's been an insanely great honor," said Microsoft's Bill Gates, who once triumphed over Jobs but has seen his legendary status overtaken by the Apple co-founder in recent years.

Jobs was surrounded by his wife and immediate family when he died in Palo Alto, California, Apple said late Wednesday. Other details were not immediately available.

Jobs stepped down as CEO in August and handed the reins to long-time operations chief Tim Cook. With a passion for minimalist design and a genius for marketing, Jobs laid the groundwork for the company to continue to flourish after his death, most analysts and investors say.

But Apple still faces challenges in the absence of the man who was its chief product designer, marketing guru and salesman nonpareil. Phones running Google's Android software are gaining share in the smartphone market, and there are questions over what the next big thing is in Apple's product line.

LEGENDARY ENTREPRENEUR

A college drop-out and the son of adoptive parents, Jobs changed the technology world in the late 1970s, when the Apple II became the first personal computer to gain a wide following. He did it again in 1984 with the Macintosh, which built on the breakthrough technologies developed at Xerox Parc and elsewhere to create the personal computing experience as we know it today.

The rebel streak that was central to his persona got him tossed out of the company in 1985, but he returned in 1997 and after a few years began the rollout of a troika of products -- the iPod, the iPhone and the iPad -- that again upended the established order in major industries.

A diagnosis of a rare form of pancreatic cancer in 2004 initially cast only a mild shadow over Jobs and Apple, with the CEO asserting that the disease was treatable. But his health deteriorated rapidly over the past several years, and after two temporary leaves of absence he stepped down as chief executive and became Apple's chairman in August.

Jobs' death came just one day after Cook presented a new iPhone at the kind of gala event that became Jobs' trademark. Perhaps coincidentally, the new device got lukewarm reviews, with many saying it wasn't a big enough improvement over the existing version of one of the most successful consumer products in history.

Apple Wednesday paid homage to its visionary leader by changing its website to a big black-and-white photograph of him with the caption "Steve Jobs: 1955-2011."

Google provided a link to the Apple site just below its search box.

The flags outside Apple's headquarters at 1 Infinite Loop flew at half mast. Employees left flowers on a bench and a mourner played music on bagpipes in an impromptu tribute.

Cook said in a statement that Apple planned to hold a celebration of Jobs' life for employees "soon."

"Steve's brilliance, passion and energy were the source of countless innovations that enrich and improve all of our lives. The world is immeasurably better because of Steve," Apple said in a statement.

"His greatest love was for his wife, Laurene, and his family. Our hearts go out to them and to all who were touched by his extraordinary gifts."

The announcement of Jobs' death came after almost all trading in U.S. stocks had finished for the day. Apple's stock was last quoted at $377.22, a tad lower than its Nasdaq close of $378.25. Apple shares listed in Frankfurt fell 2 percent.

Outside Jobs' house in Palo Alto, neighbors and friends left flowers and drew messages with markers on the sidewalk. "Thanks for changing the world," read one.

A low fence surrounded a lawn filled with apple trees.

"He was special for the area, like part of the family," said Robert Blum, who brought flowers with his eight-year-old son, Daniel.

NET WORTH $7 BILLION

Jobs, in his trademark uniform of black mock-turtleneck and blue jeans, was deemed the heart and soul of a company that rivals Exxon Mobil as the most valuable in America.

Forbes estimates Jobs' net worth at $7 billion. It was not immediately known how his estate would be handled.

His health had been a controversial topic for years and a deep concern to Apple fans and investors. Even board members have in past years confided to friends their concern that Jobs, in his quest for privacy, was not being forthcoming enough with directors about the true condition of his health.

Jobs, a Buddhist, was born in San Francisco. He started Apple Computer with friend Steve Wozniak in his parents' garage in 1976.

Six years ago, Jobs had talked about how a sense of his mortality was a major driver behind that vision.

"Remembering that I'll be dead soon is the most important tool I've ever encountered to help me make the big choices in life," Jobs said during a Stanford commencement ceremony in 2005.

"Because almost everything -- all external expectations, all pride, all fear of embarrassment or failure -- these things just fall away in the face of death, leaving only wologyhat is truly important.

"Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart." R

Few thoughts on my mind....Steve Jobs

"A man with an exceptional competence to merge art with technology."

"Jobs said, 'Remember that you will be dead soon"

"He did for technolgy what Leonardo Da Vinci did for art.

"You've got to find what you love"

"Great visionary and Leader"

"Your time is limited, so don't waste it living someone else's life."

 "Have the courage to follow your heart and intuition. They somehow already know what you truly want to become."

 "Death is very likely the single best invention of Life. It is Life's change agent. It clears out the old to make way for the new."

 "We're here to put a dent in the universe."

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With HP tablet dead, who can challenge Apple?

NEW YORK (Reuters)- The sudden demise of Hewlett-Packard Co's WebOS TouchPad after just seven weeks on shelves was a reminder of how tech giants have failed so far to take a bite out of Apple Inc's iPad.

The TouchPad joins Dell Streak 5 in the tablet graveyard and weak sales for many offerings suggest others are bound to follow.

"The non-iPad tablets just won't sell at retail. That's the clear message from events over the past few days," said Mark Gerber, an analyst at Boston research and investment firm Detwiler Fenton.

Other tablets that have failed to click with consumers include Asustek Computer Eee Pad Transformer and the Xoom from Motorola Mobility, which Google Inc plans to buy.

Research in Motion's PlayBook received scathing reviews and sales have been slack, but it will probably survive since it is key to RIM's strategy.

"I do not expect RIM to be shutting down PlayBook sales any time soon or abandoning that platform, because RIM views it as its future," said Colin Gillis, an analyst at BGC Financial in New York.

Apple's rivals have not fared any better in designing software for tablets.

Apple's iOS tablet software accounted for 61.3 percent of the tablet market in the second quarter, more than double the 30.1 percent share held by Google's Android, its nearest competitor. Microsoft held a paltry 4.6 percent share and RIM 3.3 percent, according to Strategy Analytics.

COMPETITION COMING

But the landscape could soon change. Google's move this week to buy Motorola Mobility, a hardware manufacturer, has also potentially raised the stakes against Apple as it will give the Internet leader devices to showcase its software -- just as Apple does.

All eyes are now on Google's "Ice Cream Sandwich" system, which will unite the Android software used in tablets and smartphones. That is expected to encourage developers to flock to the platform and create better apps.

Microsoft could also pose a threat when it releases its tablet software, code-named Windows 8, but this probably won't be until the fall of 2012.

"The ecosystem built around Microsoft is the largest computing ecosystem out there, so this makes it the company most likely to get significant traction in the tablet marketplace," said BGC's Gillis.

Microsoft has said the software will run on a range of devices from traditional PCs to laptops and tablets, and incorporate mouse and keyboard commands.

Amazon.com, the maker of the popular Kindle e-reader, is also expected to announce plans to release a tablet this fall, providing a challenge to Apple.

The Amazon offering could be a "game-changer," Colin Sebastian, an analyst at Robert Baird & Co, said in a recent note. The tablet will likely feature Android's Honeycomb OS system, a 7-inch screen and be priced under $300, he said.

Sebastian forecast sales of up to 3 million units in the first year and said they would eventually outsell other Android-enabled tablets from Motorola and Acer, and could potentially surpass Samsung's Galaxy Tab.

Amazon's as-yet unnamed tablet poses a significant threat to Apple because of the Kindle's popularity and the movie and music services the company sells. Analysts also expect Amazon to subsidize the tablet's price, which could also boost sales.

"Amazon is widely viewed as a wild card. It has the potential to be disruptive," said NPD analyst Ross Rubin.

The crowded market has not discouraged Sony Corp either. The consumer electronics giant is going full steam ahead with plans to release its first two tablets in the fall.

"We're going to see many competitors come and go," a Sony spokeswoman said.

"We're going to bring the best of all of the assets at our disposal to bear: hardware, content and network services."

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