Samsung is a powerhouse

The FT’s Lex column has a piece on Samsung today which spells out how powerful the company has become. Anyone with an interest in consumer electronics will have noticed their success in the TV and smartphone markets in recent years. Taking a sample of one, over the last twelve months I have bought two Samsung phones and a Samsung laptop. And on top of that they sponsor my beloved Chelsea.

What I hadn’t realised is how far they’ve come and how they did it.

Samsung’s market cap is now $198bn, making it the fifth largest technology company in the world by value. (Apple is first with c$500bn, and then Google, Microsoft, and IBM round out the top five, all with market caps slightly above $200bn.)

That’s impressive.

And they got there by investing heavily. According to the FT over the last decade three quarters of Samsung’s operating cash flows have gone on capital expenditure, around double the proportion allocated by either Apple or Intel. This year their capex will be $23bn, which is nearly enough to buy HP.

And on top of that the company is trading at 8x this year’s earnings, a 33% discount to Apple.

That level of investment deserves respect and suggests they are doing something more than just copying Apple. Furthermore, the fact that they are lowly rated suggests their market cap could climb higher, and they wouldn’t have to go too far to become the word’s second most valuable tech company.

  • Yes seems Chelsea is one of their few mistakes …. they are looking like Sony of the 80s … automatic choice for home/mobile but with more competitive pricing.

  • Keshav Malani

    So true…I think most discount Samsung on the claims that they are copying but are not taking into account their investments into Samsung’s development of an OS, flexible displays, batteries, etc. These things are prepping Samsung to be even more competitive few years out, and has nothing to do with copying.

  • most fund managers dont want capex. they want dividends, buybacks and rtn of cash. the equity market is slowly becoming a higher yielding version of the bond market. the growth agenda may have worked for Samsung but equity is becoming less and less about growth-sponsoring capital and more about coupon…

  • Is that true the world over?

    I have a perception that growth is an easier sell in the US.

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