Samsung Electronics reorganizes to fight slump
SEOUL, South Korea (AP)Â -- Samsung Electronics Co. announced a major restructuring Friday, consolidating business operations into two divisions as South Korea's most powerful and iconic corporation deals with the slowing global economy and expectations of looming red ink.
The new organization was included in an announcement of personnel changes at the company as well as at the broader Samsung Group of which it serves as flagship.
Samsung Electronics CEO Lee Yoon-woo, who retains his position, will also take on the added responsibility of overseeing a new Device Solution division combining the semiconductor and LCD businesses, according to the announcement.
The company also plans a Digital Media and Communications division to be headed by Choi Gee-sung, bringing together under one umbrella televisions, mobile phones and other consumer electronics such as printers, computers and home appliances, according to Samsung spokesman James Chung.
Samsung Electronics is the world's biggest manufacturer of memory chips, liquid crystal displays and flat screen televisions. It ranks second behind Finland's Nokia Corp. in mobile phones.
The company, however, has been struggling of late amid the global downturn and falling prices for semiconductors and flat screens. Its net profit declined 44 percent in the third quarter of 2008 from the same period in 2007.
Samsung is scheduled to announce fourth-quarter earnings on Jan. 23 and some analysts are forecasting the company will swing to a net loss.
"We needed to effectively respond to the current global recession," Samsung spokeswoman Hwang Eun-ju said regarding the reason for the changes.
She also said that Samsung will cut the pay of top executives by up to 20 percent.
The conglomerate-wide personnel changes are the second since the resignation in April of Lee Kun-hee as chairman of Samsung Electronics, the post from where he oversaw the entire Samsung Group. The position of Samsung chairman remains unfilled.
Lee Yoon-woo, the current CEO, assumed that position in May, in line with other personnel movements. Samsung Electronics also reshuffled some of its businesses at that time though not on the scale announced Friday.
Lee Kun-hee, the figure credited with building Samsung into a global force, resigned after being indicted on charges of tax evasion, for which he was eventually convicted and handed a suspended prison sentence. He was acquitted on separate breach of trust charges.
Besides Samsung Electronics, the conglomerate consists of dozens of companies with interests in shipbuilding, construction, life insurance and leisure. The group is said to account for about 20 percent of South Korea's exports.
A total of 25 executives were affected by the personnel changes at group companies, including 14 promotions, Samsung said.
"A new wave of young talent was chosen to overcome the global downturn," Samsung said in the statement.
Samsung's semiconductor and mobile phone businesses in recent years under the direction of two key executivesÂ -- Chang Hwang-gyu, dubbed "Mr. Chip" by local media, and Lee Ki-tae, known as "Mr. Phone"Â -- focused on putting the company at the forefront of technological innovation.
Hwang, most recently chief technology officer, and Lee, vice chairman for external relations, left those positions Friday, according to Chung, the spokesman.
Their departure signals a new focus.
"This means Samsung's strategy is moving from high-tech competition to profitability," said Lee Min-hee, an analyst at Dongbu Securities. Lee said he expects Samsung to record a net loss for the final three months of 2008, which he said would be the company's first on a quarterly basis.
Shares in Samsung Electronics rose 2.1 percent to close at 469,000 won ($345.42) Friday. Samsung's share price fell 19 percent in 2008.
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