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Despite exploding phones and corruption scandals, Samsung just had its best quarter in over three years

SK Group chairman Chey Tae-Won, Samsung Group's heir-apparent Lee Jae-yong and Lotte Group Chairman Shin Dong-Bin take an oath during a parliamentary probe into a scandal engulfing President Park Geun-Hye at the National Assembly in Seoul on December 6, 2016.
I solemnly swear to our shareholders this company will be just fine.
By Josh Horwitz
Published Last updated This article is more than 2 years old.

If you only read the headlines, you’d think Samsung Electronics was in dire straits. The company suffered the disastrous recall (and eventual discontinuation) of its Galaxy Note 7, effectively wiping out an entire line of flagship smartphones. Its de facto leader, Lee Jae-yong, is embroiled in a national corruption scandal involving allegations of bribing the Korean president’s personal spiritual guru.

Yet the company’s financial performance shows few signs of distress. Its quarterly and full-year earnings, released this morning (Jan. 24), show that the components side of the business has kept profit strong.

Annual revenue reached 201.9 trillion won ($173.2 billion), roughly the same as the year prior. That’s lower than the company’s revenue in 2013, when it was king of Android, but still much higher than before its boom in smartphone sales.

Profit enjoyed healthy growth, however. Operating profit for the fourth quarter hit 9.22 trillion won ($7.9 billion), a 50% annual increase despite how the aftermath of the Galaxy Note 7 fiasco continued through December. It was the best quarterly profit in over three years.

Full-year profit also grew, hitting 29.24 trillion won ($25.1 billion), a 10% increase from the profit earned throughout 2015.

Samsung credits the continued growth to its display and semiconductor division. Sales of memory chips, for example, increased 18% annually during the fourth quarter. The division enjoyed a 39% increase in revenue in 2016 compared to the previous year, and it continues to make up an increasing share of the company’s profit, while its phones grow less lucrative.

As a result, Samsung will likely remain shielded from any potential fallout in phone sales resulting from the Galaxy Note 7 explosions, as well as from a broader market slowdown in smartphone sales growth.

Investors like what they see. Shares of Samsung Electronics opened .05% higher than the previous day’s close. Yesterday the company’s stock price rose 2.3% between the market’s open and close, even as its press conference revealing the cause of the Galaxy Note 7 explosions generated a lukewarm reception.

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