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Samsung Electronics Q2 profit likely up 38% on strong chip prices


People wears masks in front of a Samsung store at a main shopping area as the country is hit by an outbreak of the new coronavirus in downtown Shanghai, China February 21, 2020. REUTERS/Aly Song/File Photo

  • Q2 operating profit estimated at 11.3 trln won
  • Surging chip prices, shipments boost profit
  • Revenue estimated up 15.4%
  • Smartphones shipments likely fell on quarter

SEOUL, July 6 (Reuters) – Samsung Electronics Co Ltd (005930.KS) likely saw a 38% surge in profit for the April-June quarter thanks to strong chip prices and demand spurred by a pandemic-led consumer appetite for electronics as well as recovering investment in data centres.

Operating profit for the world’s biggest memory chip and smartphone maker likely jumped to 11.3 trillion won ($10 billion), according to a Refinitiv SmartEstimate drawn from 20 analysts and weighted toward those who are more consistently accurate.

The South Korean tech giant’s strong performance – coming despite it shipping fewer smartphones than in January-March – underscores the stratospheric demand for chips that has depleted stockpiles and filled production capacity.

The result would be up 20% from the first quarter and mark Samsung’s highest operating income for the second quarter since 2018. Revenue likely rose 15.4%.

Samsung is scheduled to announce preliminary second-quarter results on Wednesday.

The company’s chip division likely benefited from memory chip price hikes that exceeded market estimates, analysts said, while shipments grew as well.

Prices of DRAM chips, widely used in servers, mobile phones and other computing devices, jumped 27% compared to the March quarter, while those of NAND flash chips that serve the data storage market rose 8.6%, according to research provider Trendforce.

Profit also improved at Samsung’s chip-contract manufacturing and logic chip design business, partly because operations at its storm-hit Texas factory returned to normal, analysts said.

They estimated the chip division’s operating profit in April-June rose about 22% from the year-earlier period to about 6.6 trillion won.

Still, Samsung’s smartphone shipments dropped to about 59 million in April-June from about 76 million in the first quarter, according to Shinyoung Investment & Securities, as sales slowed for its latest flagship model, launched in mid-January.

Reduced demand from India, hard hit by the pandemic during the quarter, as well as tight supply for some mobile processor chips may also have affected shipments, analysts said, estimating the mobile business’ operating profit at about 2.9 trillion won.

($1 = 1,129.2800 won)

Reporting by Joyce Lee; Additional reporting by Heekyong Yang; Editing by Sayantani Ghosh and Christopher Cushing

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Gadgets

Google loosens its search engine grip on Android devices in Europe


Google (GOOGL.O) has bowed to pressure from rivals and will let them compete for free to be the default search engines on Android devices in Europe, widening a pledge to EU antitrust regulators two years ago.

The move by the world’s most popular internet search engine comes as the 27-country bloc considers rules that could be introduced next year to force Google, Amazon (AMZN.O), Apple (AAPL.O) and Facebook (FB.O) to ensure a level playing field for competitors.

Google’s Android mobile operating system runs on about four-fifths of the world’s smartphones. The U.S. tech giant said in 2019 that rivals would have to pay via an auction for appearing on a choice screen on new Android devices in Europe from which users select their preferred search engine.

Google’s change of heart followed a 4.24 billion euro ($5.16 billion) fine handed out by the European Commission, the EU antitrust authority, in 2018 for unfairly using Android to cement the dominance of its search engine.

“We are now making some final changes to the Choice Screen including making participation free for eligible search providers. We will also be increasing the number of search providers shown on the screen,” Google director Oliver Bethell wrote in a blog post on Tuesday.

The changes will come into effect in September, the blog added.

The Commission said it had discussed possible changes with Google following concerns raised by a number of its rivals, adding that those announced were positive developments.

Google said the five most popular eligible search engines in each EU country according to StatCounter, including Google, would be displayed in random order at the top of the screen while up to seven will be shown at the bottom.

The logo of Google is seen on a building at La Defense business and financial district in Courbevoie near Paris, France, September 1, 2020. REUTERS/Charles Platiau

It had previously only allowed four competitors, chosen in separate auctions for each EU country, to be displayed on Android screens.

However DuckDuckGo, a rival search engine that has long complained about the auction process, said Google should go further.

“Google is now doing what it should have done three years ago: a free search preference menu on Android in the EU,” CEO Gabriel Weinberg tweeted.

“However, it should be on all platforms, eg also desktop Chrome, accessible at all times, ie not just on factory reset, and in all countries.”

Search engine Ecosia, which together with four other rivals complained about Google’s initial proposal to the Commission last year, welcomed the changes.

“With this, we have something that resembles a level playing field in the market,” its CEO Christian Kroll said in a statement.

“Search providers now have a chance to compete more fairly in the Android market, based on the appeal of their product, rather than being shut out by monopolistic behaviour.”

($1 = 0.8211 euros)

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Future

U.S. judge rejects Bayer’s $2 bln deal to resolve future Roundup lawsuits


Monsanto Co’s Roundup is shown for sale in Encinitas, California, U.S., June 26, 2017. REUTERS/Mike Blake

A U.S. judge rejected Bayer’s $2 billion class action proposal to resolve future lawsuits alleging its Roundup weedkiller causes cancer, saying in a Wednesday order that parts of the plan were “clearly unreasonable.”

Bayer (BAYGn.DE) has committed up to $9.6 billion to resolve some 125,000 existing claims linking Roundup to non-Hodgkin lymphoma, a type of blood cancer. The proposed class action settlement was aimed at claims by people who have been exposed to the weedkiller and who become sick in the future.

Bayer has said that decades of studies have shown that Roundup and its main active ingredient glyphosate are safe for human use. Bayer did not immediately respond to a request for comment.

U.S. District Court Judge Vince Chhabria in San Francisco said the proposal “would accomplish a lot for Monsanto,” which Bayer acquired for $63 billion in 2018, and “would accomplish far less for the Roundup users” who are currently healthy.

Chhabria had outlined his doubts about the plan in a hearing last week. read more

The plan would have grouped potentially millions of residential users and farm laborers in a class and provided them free medical exams for four years and up to $200,000 if they were diagnosed with non-Hodgkin lymphoma.

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Gadgets

U.S. downgrades Mexico air safety rating, offers assistance


Screens show flight information at the almost empty Benito Juarez international airport, as the spread of the coronavirus disease (COVID-19) continues in Mexico City, Mexico, June 11, 2020. REUTERS/Edgard Garrido

The United States on Tuesday downgraded Mexico’s aviation safety rating, an action that bars Mexican carriers from adding new U.S. flights and limits the ability of airlines to carry out marketing agreements with one another.

The U.S. Federal Aviation Administration, in announcing the action, said it is “fully committed to helping the Mexican aviation authority improve its safety oversight system to a level that meets” international standards. The agency also said it is “ready to provide expertise and resources” to resolve issues raised in the safety assessment process.

The FAA downgraded Mexico – the most common destination for U.S. air travelers last month – from a level called Category 1, which signifies compliance with international standards, to Category 2, the lowest level.

That rating, according to the FAA, means Mexico lacks “necessary requirements to oversee the country’s air carriers in accordance with minimum international safety standards, or the civil aviation authority is lacking in one or more areas such as technical expertise, trained personnel, record keeping, inspection procedures or resolution of safety concerns.”

The FAA action sent shares in Mexican airlines down.

A similar FAA downgrade of Mexico in 2010 over suspected shortcomings within its civil aviation authority lasted about four months. Only a few countries currently are rated Category 2 by the FAA, including Bangladesh, Pakistan, Thailand and Malaysia.

Plans for the FAA downgrade were first reported on Friday by Reuters. read more

The FAA said its reassessment of the Agencia Federal de Aviacion Civil from October 2020 through February identified several areas of non-compliance with minimum international safety standards.

The Mexican government did not immediately respond to a request for comment.

Mexican President Andres Manuel Lopez Obrador on Monday had urged U.S. authorities not to downgrade Mexico, arguing that his country was complying with all relevant norms.

The downgrade means current U.S. service by Mexican carriers is unaffected, but they cannot begin new flights. U.S. airlines also will no longer be able to market and sell tickets with their names and designator codes on Mexican-operated flights and the FAA will increase scrutiny of Mexican airline flights to the United States.

Mexico has been a top vacation spot for U.S. travelers during the COVID-19 pandemic, spurring U.S. airlines to redirect capacity they had previously flown to Europe before transatlantic travel restrictions were imposed last year.

Mexico was the by far the busiest foreign air destination in April – with nearly 2.3 million passengers on U.S.-Mexico flights – more than three times that of the Dominican Republic, the next most-popular country destination, according to industry data.

Delta Air Lines said on Tuesday an FAA downgrade was not about (DAL.N) its partner Aeromexico (AEROMEX.MX) and that the action will have little impact on customers. read more

Delta said it will need to reissue reservations for some Aeromexico operated flights that were booked through Delta.

“This is not about Aeromexico. This is about the Mexican version of the FAA not having some of the right protocols in place,” Delta president Glen Hauenstein said at a Wolfe Research conference.

Delta has a codeshare arrangement with Aeromexico enabling the two air carriers to sell seats on each other’s flights. Delta will be forced to remove its codes on Aeromexico flights following the downgrade, though Aeromexico could continue to code on Delta flights and members of Delta’s loyalty program could still receive SkyMiles on Aeromexico flights that would normally carry the code, Hauenstein added.

Pablo Casas, general director of the National Institute of Legal-Aeronautical Research think tank, said the downgrade could impact the Mexican economy and carriers trying to recover from the business effects of the pandemic.

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Reviews

Toshiba unit hacked by DarkSide, conglomerate to undergo strategic review


A Toshiba Corp (6502.T) unit said it was hacked by the DarkSide ransomware group, overshadowing an announcement of a strategic review for the Japanese conglomerate under pressure from activist shareholders to seek out suitors.

Toshiba Tec Corp (6588.T), which makes products such as bar code printers and is valued at $2.3 billion, was hacked by DarkSide – the group widely believed to be behind the recent Colonial Pipeline attack, its French subsidiary said.

It added, however, that only a minimal amount of work data had been lost.

“There are around 30 groups within DarkSide that are attempting to hack companies all the time, and they succeeded this time with Toshiba,” said Takashi Yoshikawa, a senior malware analyst at Mitsui Bussan Secure Directions.

Employees accessing company computer systems from home during pandemic lockdowns have made firms more vulnerable to cyber attacks, he added.

Screenshots of DarkSide’s post provided by the cybersecurity firm said more than 740 gigabytes of information was compromised and included passports and other personal information.

Reuters could not access DarkSide’s public-facing website on Friday. Security researchers said DarkSide’s multiple websites had stopped being accessible.

Ransomware attacks have increased in number and amount of demands, with hackers encrypting data and seeking payment in cryptocurrency to unlock it. They increasingly release stolen data as well, or threaten to unless they are paid more.

Ireland’s health service said on Friday it had shut down its IT systems after what it described as a “significant” ransomware attack. read more

Investigators in the U.S’s Colonial case say the attack software was distributed by DarkSide, which includes Russian speakers and avoids hacking targets in the former Soviet Union. DarkSide lets “affiliates” hack into targets elsewhere, then handles the ransom negotiation and data release. read more

STRATEGIC REVIEW

Amid calls from shareholders to explicitly seek offers from potential suitors after dismissing a $20 billion take-private bid from CVC Capital this year, Toshiba said it was setting up a strategic review committee and had appointed UBS (UBSG.S) as financial adviser.

Reporters raise their hands for a question during a Toshiba news conference at the company headquarters in Tokyo, Japan, June 23, 2017. REUTERS/Issei Kato

The review will be conducted by independent directors and is designed to help the board consider a new business plan to be put forward by management by October.

The CVC offer faced strong opposition within the company. Its plan to retain management was perceived by some as aimed at shielding former CEO Nobuaki Kurumatani from activist shareholders.

At a briefing by the company on Friday, 3D Investment Partners and Farallon Capital Management, its No. 2 and No. 3 shareholders respectively, both criticised Toshiba for appearing reluctant to consider offers to go private.

Chief Executive Satoshi Tsunakawa responded that the company has “no reluctance to consider various proposals to increase corporate value, including going private.”

Sources have said other private equity investors such as KKR & Co Inc (KKR.N) and Bain Capital are interested in Toshiba. read more

However, the Asahi newspaper reported on Friday that Bain Capital is not considering buying Toshiba, citing an interview with Yuji Sugimoto, the head of Bain Capital’s Japan operations.

Battered by accounting scandals, massive writedowns for its U.S. nuclear business as well as the sale of its chip unit, Toshiba is a shadow of its former self.

But it remains one of Japan’s few manufacturers of nuclear power reactors and makes defence equipment, meaning any sale of would require government approval.

Toshiba on Friday forecast a 63% rise in annual operating profit to 170 billion yen ($1.6 billion), rebounding from pandemic-induced pain in the last year and as restructuring measures bear fruit. That follows a 20% slide in profit last year.

Toshiba also nominated four new board members after Kurumatani resigned last month. Kurumatani had been under fire due to allegations that investors were pressured before a shareholder meeting last year to support desired board nominations.

Shareholders in March successfully voted for an independent investigation into those allegations, marking a watershed victory for corporate governance in Japan. The probe is due to conclude before this year’s annual general meeting on June 25.

The board nominations announced on Friday included George Olcott, a former UBS banker who is also an independent board member at Japanese beer maker Kirin Holdings (2503.T).

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