Following record third-quarter profits, Korean tech giant Samsung has appointed a suite of new senior executives, ending its leadership crisis.
At the top of South Korea’s biggest company are the executives in charge of Samsung Electronics’ three main business units. Kim Ki-nam will head the Device Solutions division, including the components business, which has become a big revenue driver, selling memory chips and displays to other smartphone makers. Kim Hyun-suk will lead Consumer Electronics, and Koh Dong-jin will lead IT and Mobile Communications. Once appointed to the company’s board, the three will also serve as Co-Chief Executives, replacing Co-CEOs J.K. Shin and Yoon Boo-keun. The company’s CFO, Lee Sang-hoon, will become board chairman in March.
Samsung is ushering in this new era on a high note. The company’s third-quarter operating profit nearly tripled from last year, and revenue climbed more than 29% to 62 trillion won. Samsung said its 2017 capital expenditure would be its biggest ever, up by a whopping 81% to more than 46 trillion won ($41 billion). The company is building new chip factories and clean-rooms to keep up with demand for servers and devices with more powerful memory, driven by the rapid expansion of cloud computing and services powered by AI.
The appointment of a new executive leadership team is meant to quell investor concerns about the leadership vacuum left by the downfall of Jay Y. Lee, and restore a sense of stability to the $348 billion company. The new team consists entirely of long-time Samsung insiders, a choice that telegraphs continuity rather than change. “It’s a younger generation of leaders, but the divisional structure has not fundamentally changed,” said Park Ju-gun, head of research firm CEO Score.
Referencing a post-earnings call with analysts, Park Jung-hoon of HDC Asset Management said, “The chips business will focus on profitability, not market share - suggesting they will continue the current course without deviation, which put our minds to rest.”
Shareholders can expect positive change, however, as Samsung said it will double dividends next year to 9.6 trillion won ($26 billion) and maintain that level until 2020. This comes in response to pressure from investors to share more of its cash reserves and fall closer in line with its more generous tech industry peers, such as Apple and Microsoft. As Reuters reports, “The shareholder return policy for the next three years ramped up guidance to a level higher than its current range of 30-50 percent of free cash flow to 50 percent over three years.”
