Samsung’s recent success in the smartphone market with devices like the Galaxy S II, the Galaxy S III, and the Galaxy Note family have helped the company grab market share by the bucketload, and with that comes heaps of cash.
The Korean electronic giant now has almost $40 billion in cash and cash reserves, which, after taking away its debt, equals 31.2 trillion won ($28.5 billion) in cash stockpiled for a rainy day.
That’s nowhere near the $144.7 billion Apple has piled up, of course, but it’s a bank balance most other consumer electronics companies would be jealous of. And according to The Wall Street Journal, Samsung’s cash pile is “building at an eye-popping rate,” almost tripling over the past year alone.
So, what will Samsung do with all that cash? Well, analysts expect it to use that money for acquisitions and expand into areas like software and medical equipment. It’s thought shareholders will also seek higher returns, either through a boost in its dividend or a share buyback.
Samsung has told The Journal that the company will prioritize “investments sustainable for areas like facilities, R&D, and marketing that will help the company solidify or boost competitiveness” when looking to spend its cash reserves.
Samsung’s cash growth comes after a shift in how the company generates its profits. While it has seen most of its cash come from its chip and component divisions in the past, most of the money now comes from its smartphones.
Samsung’s mobile business accounted for a whopping 74% of its operating profit during the first quarter of 2012, while other consumer electronics — such as TVs — and chips and components made up the rest.
One of the reasons why Samsung’s cash reserves have ballooned is that it has kept capital spending mostly flat in recent, though the company continues to spend more than its rivals. It spent 22.8 million won in capital expenditures in 2012, which was pretty much the same amount spent in 2011. Samsung will also keep spending flat this year.
“The cash balloon never got that big because they were reinvesting it all, but now that’s starting to change,” said Mark Newman, a Hong Kong-based analyst for Sanford C. Bernstein, who estimates that Samsung’s cash may grow to 100 trillion won by the end of 2015. “It’s getting near the point where it’s more than enough.”
Samsung now has the second-biggest cash pile in Asia, following only China Mobile, China’s largest wireless provider, which has $64 billion in cash reserves.
Source: The Wall Street Journal