Yesterday I was lucky enough to be asked to attend the Samsung analyst and investor day in Korea on behalf of a client. It’s only the second event ever organised by the Korean giant and the first since 2005.
As you might imagine for such an ambitious company it was quite the event, taking place at their own historic Hotel Shilla in Seoul and featuring an impressive display of future technology in the lobby.
Folding displays and transparent TVs
Lest we forget, Samsung manufacture all the mobile processors for Apple
Although investor relations deserve a lot of credit for convincing the powers that be to demonstrate what they are close to delivering at the cutting edge, perhaps understandably their was no photography.
Watch out in the next few years for foldable screens, transparent TVs and, behind the scenes, 3D DRAM that could change the compute memory industry again. Trust me on that last one.
Hoarding cash for future acquisitions
The meat of the day was the CEO and CFO presentations where they made all the right noises about emphasising profits over revenue growth, carefully considering shareholder returns and raising the dividend. They will, however, keep hold of their vast $50bn cash pile for unspecified acquisitions.
Samsung’s revenues alone account for 20% of Korea’s GDP
Aside from that, there are several striking things about the company.
First of all, its sheer size. They have 326,000 employees! Their revenues alone account for 20% of Korea’s GDP.
They also have an impressive portfolio of businesses. Their approach is classically vertically integrated, supplying an increasing amount of their own components to their devices. But these components, be it the display, the memory or the processing power are world leading in their own right. Lest we forget, they manufacture all the mobile processors for Apple.
And they are strikingly ambitious for such a large company. They were very clear that they want to disrupt markets as diverse as those for fridges, washing machines, enterprise security, vehicles and healthcare. This is a company whose influence in our lifetimes, both visible and hidden, is going to be major.
But the point I really want to make is a slightly different one.
For smaller companies I know that dealing with investors can feel like at best a distraction and at worst a compromise to the long term success of the whole business. It is a time consuming business, and as much as it may involve a cheque at some stage down the line, it is not always obvious that the cost/benefit ratio of time invested is favourable.
And yet even a company of Samsung’s stature, with a famous lack of deference towards shareholders, must on occasion directly address their concerns and offer some concessions. It is surprising even to experienced investors that they feel the need, and yet (slowly) they are clearly moving in the direction of increased shareholder engagement.
In the political economic system that we have adopted courting, managing and delivering on investment, it appears, is a universal requirement.
Samsung’s deference towards shareholders
And yet it is perhaps appropriate that I am writing this column from Korea where the consequences of the alternative are all too painful to behold, just across the border to the North.
To paraphrase Churchill, it is the worst of all systems apart from all the others that have been tried from time to time. It has led, one way or another to Tech City and the Samsung Galaxy S4.
For all the friction, there is something to be said for that.
Chris Woodcock has over five years experience of analysing top technology stocks, he now manages his own independent research firm Cedilla Research. He writes his markets column every fortnight at Tech City News.