Samsung's profit falls as smartphones get cheaper

SEOUL, South Korea — Declining smartphone prices hit profit at Samsung Electronics Co. for a second straight quarter.

The consumer technology heavyweight said Tuesday that it expects operating income of about 8.4 trillion won ($8 billion) for the January-March quarter, down 4 percent from a year earlier. Sales were flat at 53 trillion won. Samsung, the world's largest maker of smartphones, televisions and memory chips, will release full quarterly results later this month.

The operating profit was in line with the median estimate by analysts surveyed by FactSet. Compared with the previous quarter, sales sank 11 percent while operating income inched up 1 percent.

The year-on-year profit decline shows the challenge for Samsung to maintain earnings growth as smartphone prices fall. The devices are its biggest cash cow, accounting for more than two-third of its income.

The average price of a Samsung smartphone this year will likely be $275, down 9 percent from 2013, according to Chung Chang-won, an analyst at Nomura Financial Investment.

That is because smartphone sales growth is slowing in North America, Europe, South Korea and Japan while consumers in developing nations tend to buy cheaper handsets.

Chinese handset makers are also vying for customers in emerging markets. Samsung faces competition from a slew of handset makers in regions such as Southeast Asia where Lenovo and Xiaomi are expanding.

"In 2014, I expect that even more Chinese vendors will come in and they will put in greater investment in such emerging markets and they will pose a bigger threat" to Samsung, said Ryan Lai, an analyst at research firm IDC.

Latest data shows Samsung is fending off the threat at least in China. The maker of Galaxy smartphones sold a record number of smartphones in the world's most populous country in February, according to Counterpoint Technology Market Research. Apple Inc. tied Lenovo for second even after the launch of the iPhone through China Mobile helped the company boost sales.

Declining prices of smartphones also put pressure on profit margins for components that go into mobile devices, such as memory chips and display panels, two other key products made by Samsung.

Samsung is attempting to cut costs in response to its business challenges. Earlier this year, a mobile business executive said the company will reduce the proportion of ads and promotional fees to revenues. Samsung spent over $11 billion on advertising and promotions for handsets, televisions and other products last year.

Most analysts expected Samsung's bottom line to improve from the current quarter as the latest version of its flagship smartphone, the Galaxy S5, goes on sale worldwide from Friday. It selling the phone for slightly less than the previous version.

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Power cos. ask SJC to cut fines

Three power utilities that were hit with nearly 
$25 million in fines for botching widespread power outages during back-to-back storms in 2011 joined forces yesterday in hopes the Supreme Judicial Court will give them relief from the Department of Public Utility's punishing blow.

National Grid was ordered to pay $18,750,000; Nstar $4,075,000; and Western Massachusetts Electric $2 million after a DPU investigation in the aftermath of Tropical Storm Irene in August 2011, and the Halloween nor'easter two months later found poor staffing, response times and communication with customers and public safety officials.

Attorneys for the utilities told the Supreme Judicial Court yesterday that DPU doesn't have enough evidence to justify the steep fines.

"The department's order fails to provide factual support for its sweeping contentions," National Grid lawyer David Rosenzweig said.

Attorney General Martha Coakley and first responders disputed that.

"They've done a much better job the last two years, but back when all of this was going on, they were not responsive, they didn't want to listen, and they didn't start listening until they got fined," said Brockton Fire Chief Richard Francis.

Coakley told the Herald the fines handed out by the DPU were "justified."

"And the issues around preparedness particularly, their ability to get back up service, to communicate with people, we felt was an issue," she said. "We have the authority, we believe — and that's what was at issue before the Supreme (Judicial) Court — to seek those kinds of fines."

The SJC took the matter under advisement.

Krista Selmi, a DPU spokeswoman, said the companies have already paid their penalties, with credits going to customers last year. If the SJC sides with the utilities, they would recoup the money through charges to all of their "retail delivery service customers," Selmi said.

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BOJ refrains from further easing monetary policy

TOKYO — Japan's central bank has refrained from expanding its ultra-loose monetary policy despite a sales tax hike, saying the economy is recovering moderately.

The Bank of Japan's policy statement Tuesday was the first since an April 1 increase in the sales tax, to 8 percent from 5 percent, that is expected to stall economic growth in coming months as consumers adjust to higher costs.

The BOJ said inflation is likely to remain at about 1.25 percent for some time, below its target of 2 percent.

"Business sentiment has continued to improve, although some cautiousness about the outlook has been observed," it said. There has been an uptick in corporate investment, the bank said.

Japanese policymakers are counting on expectations of higher prices in the future to drive consumer spending and eventually prompt companies to invest more and create more jobs. The central bank's assessment of current economic trends is calibrated to support that approach.

The bank's decision to stand pat was expected.

"While the economy will surely contract in the second quarter, this needs to be seen in light of a likely surge in output in the first quarter and a likely rebound in the third quarter," Capital Economics said in a commentary Tuesday. "What's more, there is already substantial monetary easing in the pipeline until year-end."

Strong public investment and a housing boom have helped support growth since BOJ Gov. Haruhiko Kuroda announced, a year ago, unprecedentedly huge asset purchases to spur inflation and help Japan's economy recover from two decades of doldrums.

Kuroda has said the policies will remain for as long as needed.

Meanwhile, Japan's current account returned to surplus in February for the first time in five months, the Finance Ministry reported.

It said higher income from overseas securities investments, due to the weaker yen, offset the trade deficit, although the surplus in the current account, which also includes trade, fell 5.7 percent from a year earlier to 612.7 billion yen ($5.9 billion).

Japan has ramped up imports of oil and gas to compensate for the loss of its nuclear power capacity following the 2011 accident at the Fukushima Dai-Ichi nuclear power plant. A weakening in the yen's value in the past 18 months has inflated the cost of its imports, while exports have not kept pace.

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Kitchensurfing brings chefs home

For people who want to entertain with talented chefs cooking in their homes — and learn a little about cooking themselves — it may be time to go Kitchensurfing.

Founded in New York in 2012, the company branched out into Boston last year, pairing customers with professional chefs and amateurs with a culinary flair.

"There's a novelty factor about having a meal prepared for you that's special and intimate," said Kitchensurfing founder and CEO Chris Muscarella, a self-described "competent home cook, but no chef."

"People are amazed at the food coming out of their kitchen," said Muscarella, who grew up in Framingham. "And instead of being stuck in the back of a restaurant, chefs get to actually see people enjoying the food they prepared."

After years of working in the tech industry, Muscarella helped open a restaurant in Brooklyn a few years ago and thought: "If a chef wanted to be an entrepreneur, how would they be able to do what they love without having to put up any money to do it?"

Muscarella's website lets people enter the number of guests in their party and their budget. Kitchensurfing connects them with chefs who send them menus that can be customized, and the price per person. Customers then pick a chef, who shops, shows up at their house, cooks, serves and cleans up afterward.

Chefs are vetted by the company in a test kitchen and set their own prices, with 10 percent of each transaction going to Kitchensurfing.

In Boston, there's Mark Hardin, who prepares a taco and burrito bar starting at $25 per person, and Bing Liu, formerly of Corton and Dovetail — two upscale New York restaurants — who offers a tasting menu beginning at $100 per person.

Jeff Gabel of Boston discovered Kitchensurfing through Twitter and in January hired Chris Borges and Jose Ordovas to prepare a nine-course tasting with wine pairings for two for $300.

"It was comparable to (opulent Back Bay eatery) Clio, but I didn't have to go out, and I got to learn how to make pasta," said Gabel, 25. "I would certainly do it again. I think it's changing how people think about fine dining."

Kitchensurfing chefs Borges and Ordovas, two Harvard graduate students who often cook together when they aren't studying immunology, prepared an elaborate dinner that included duck with dark chocolate and squid ink agnolotti, each stuffed with a single bay scallop and draped in mussel shell broth resembling sea foam, on a plate sprinkled with brown butter powder like sand.

"The beauty of Kitchensurfing is they let both amateur and professional chefs sign up," said Borges, who was trained by his father, a New York chef who graduated from the Culinary Institute of America. "It gives us the opportunity to hone our craft. Before, we would get a group of friends together and cook for them. But the stakes are higher when you're cooking for someone who's paying you."

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Tech stock sell-off spreads to Asian markets

HONG KONG — Internet and technology stocks tumbled across Asia on Monday as a sell-off spread from Wall Street where investors knocked down such companies over worries about excessively high valuations.

Mainstays of the Internet economy such as Google and Netflix that have surged over the past year were hammered on Friday as investors had a change of heart and decided prices were too high. The technology-heavy Nasdaq had its biggest one-day drop since February.

"Perhaps the key equity story now is the horrible price action in the momentum/growth stocks; especially ones that trade, or at least did trade, on outrageous valuations," Chris Weston, chief strategist at IG Markets in Melbourne, wrote in a commentary.

The sell-off flowed to Asia, especially in Japan where the Nikkei 225 led regional declines, dropping 1.6 percent to 14,818.08. Japanese Internet company Softbank Corp. slid 4.6 percent. Yahoo Japan plunged 5.3 percent and e-commerce firm Rakuten Inc. sank 5.2 percent

South Korea's Kospi slipped 0.3 percent to 1,981.75 as Naver, which owns the Line messaging app, tumbled 6.2 percent. NCsoft, developer of online games such as Lineage, lost 4.5 percent.

Hong Kong's Hang Seng was down 0.6 percent to 22,376.43. Hong Kong-listed shares of China's Tencent Holdings, which owns the smartphone-based instant messaging service WeChat, fell 4.4 percent. Chinese software maker Kingsoft Corp. slid 5.3 percent.

Australia's S&P/ASX 200 shed 0.1 percent to 5,415.20 while markets in mainland China were closed for a holiday.

Investors this week will be looking ahead to some key releases for further clues on the economic outlook. On Tuesday, they'll be awaiting a policy statement from the Bank of Japan that may reveal whether the central bank will provide further stimulus. On Wednesday, they'll be scrutinizing minutes from the Federal Reserve's policy setting committee.

On Wall Street on Friday, the Nasdaq composite index plunged 2.6 percent to close at 4,127.73. The S&P 500 index fell 1.3 percent to 1,865.09 while the Dow dropped or 1 percent to 16,412.71.

In currencies, the euro fell to $1.3698 from $1.3703 in late trading Friday. The Japanese yen slipped to 103.09 from 103.26.

In energy trading, benchmark U.S. crude for May delivery was down 26 cents to $100.88 in electronic trading on the New York Mercantile Exchange. The contract rose 85 cents to settle at $101.14 on Friday.

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India's Sun Pharma buys Ranbaxy in $4 billion deal

MUMBAI, India — India's Sun Pharmaceutical Industries is buying troubled generic drugmaker Ranbaxy Laboratories in a $4 billion all-stock transaction, the companies said Monday.

The combined company will be India's biggest pharmaceutical firm, with annual revenue estimated at $4.2 billion.

Shares of Sun Pharma rose 1.7 percent. Ranbaxy's shares were down 4.8 percent in trading on the Bombay Stock Exchange.

Ranbaxy is the leading drugmaker in India's $26 billion generic pharmaceutical industry, but it has faced penalties from U.S. regulators for years. The U.S. has banned imports of drugs from two of its factories because of concerns about quality control.

The acquisition will allow Sun Pharma to tap into Ranbaxy's strong global presence and manufacturing capabilities. The combined company will have 47 factories across five continents and operations in 65 countries, said Dilip Shanghvi, Sun Pharma's managing director.

"In high-growth emerging markets, it provides a strong platform which is highly complementary to Sun Pharma's strengths," Shanghvi said. "We see tremendous growth opportunities."

The companies said Ranbaxy shareholders will receive 0.8 shares of Sun Pharma for each share of Ranbaxy with an implied value of 457 rupees, a premium of 18 percent to Ranbaxy's average share price over 30 days. Ranbaxy shareholders are expected to own 14 percent of the new company and Ranbaxy's parent company, Japan's Daiichi Sankyo, will be the largest single shareholder.

Ranbaxy has annual revenue of about $2 billion.

The acquisition is subject to approval of shareholders of both Sun Pharma and Ranbaxy.

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Wynn urged to play with unions

The president of the Massachusetts AFL-CIO, who as a state senator played a key role in shaping the expanded gaming law, is calling on Wynn Resorts to follow in the footsteps of Mohegan Sun — its competitor for the lucrative Boston-area casino license — and sign a pledge to stay neutral in any future elections that would decide what unions represent workers in its casinos.

"I don't care who gets (the license), all I want them to do is stay out of it," said Steven Tolman, under whose umbrella a host of unions fall, including UNITE HERE, which represents hospitality workers in Wynn's Las Vegas casino. "Some of (the casino companies) could be supportive more of a union that might be more amenable to the company's needs. Labor harmony was in the legislation, so all that means is that they keep out of it, they allow a democratic process to take place without them interfering."

Mohegan Sun, which is proposing a casino at Suffolk Downs in Revere, has labor harmony deals with several unions, including IBEW Local 103, Teamsters Local 25, UAW and Laborers Local 22.

Both Mohegan and Wynn have reached harmony agreements with the union organizations who would build a casino, but only Mohegan has them with unions who could represent casino employees. In its license application, Wynn says it intends to enter into harmony talks on casino jobs after it receives the license.

"Since opening, Wynn has had positive union relationships at our Las Vegas location; we will have the same positive relationships in Everett," Wynn spokesman Michael Weaver said.

"We were very pleased with the positive comments made by UNITE HERE at our Surrounding Community hearing, which we believe were indicative of the nature of our long-standing agreements with labor."

Its application touts relationships with UNITE HERE's Las Vegas chapter as well as unions representing bartenders and dealers.

"Wynn Resorts has long-standing constructive relationships with organized labor in its operations in Las Vegas," the application says.

The state gaming law calls on the Gaming Commission to base its license award decisions in part on "whether the applicant has included detailed plans for assuring labor harmony during all phases of the construction, reconstruction, renovation, development and operation of the gaming establishment."

In testimony before the commission, Tolman and representatives from the UAW have praised Mohegan for reaching the labor harmony deals and criticized Wynn for not yet doing so. The UAW represents dealers at Foxwoods in Connecticut and Newport Grand Slots in Rhode Island, as well as casinos in Atlantic City, Ohio, Detroit, Indiana and Las Vegas.

UNITE HERE, which sponsored efforts to defeat Mohegan's casino at the ballot box in Revere in February, has endorsed Wynn's Everett plan, president Brian Lang said. The union flew two workers from Wynn's Las Vegas casino to a recent Gaming Commission hearing to praise the company's working conditions.

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Phone passwords go high tech

Traditional passwords, sometimes difficult to remember and easy to steal, are inadequate for increasing digital security needs and companies are answering the call with fingerprint sensors, voice biometrics and sound waves.

"User ID and password is how I logged into AOL in 1994," said Andrew Grochal, vice president of operations and finance at digital security company Certus Technology Systems, an early-stage startup that is testing logging onto websites and other secure locations like ATMs using high-frequency sound waves. "The user ID and password is a painful, horrible nightmare, and now everyone has a smartphone in their pocket that can send and pick up sound."

Certus works by sending a unique, one-time sound undetectable to humans ­— like a dog whistle — from a computer to a smartphone app, which then authenticates the user, said Grochal. Because the sound expires 0.3 seconds after use, Certus is significantly harder to hack, Grochal said. Another benefit of Certus, Grochal said, is not having to remember complex passwords.

"The goal is to fix both the user experience problem and the security problem at the same time," he said.

Certus has raised $375,000 from angel investors, and is running a pilot program with a local company. Grochal said the company will likely begin a second pilot in the coming months.

Digital security has begun to move beyond passwords after high profile username and password hacks with the addition of fingerprint sensors in both the iPhone and Galaxy S5, Samsung's flagship smartphone.

"Passwords are more unwieldy and less secure than some of these other methods," said Roger Kay, founder of Endpoint Technologies, a technology research and analysis firm.

Nuance, the Burlington-based company that powers Siri, added voice biometrics to its own personal assistant app last week.

"Entering a pin or a password is clunky," said Josh Lipe, director of mobile products and solutions for Nuance.

For consumers, Nuance is using the voice biometrics technology to improve personalization and understanding, but it offers voice recognition and authentication for businesses to address "increasing consumer dissatisfaction with PINs, passwords and security questions," the company said in a statement.

Lipe said voice biometrics could easily replace a pattern or PIN to unlock a phone, features that have not kept up with advancing technology. "2003 called. They want their features back," Lipe said.

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What’s causing RAV4’s tire pressure warning to light?

I have a 2005 Toyota RAV4 with 115K miles. Intermittently the dashboard's tire pressure warning light comes on, even when all tires are within 4-5 pounds. This is the indirect-type TPM system associated with the ABS brakes. I use the "blinks 3 times" method to get the light to stay off after verifying pressures. The dealer has no clue what is causing this and suggested just ignoring the light. The tire store verified that the tires are OK.

Three of my tires pass the "Lincoln's head" test, but should probably be replaced this summer. One is a warranty replacement so is a slightly different diameter than the others. I think the warranty tire was installed after this problem started but I'm not sure. Where would you start to run this to ground?

Toyota issued a brake system service bulletin in February 2006 that indicated that the Low Tire Pressure warning light can illuminate without cause due to a lack of or improper "re-initialization" after tire replacement or tire rotation. The "blinks 3 times" procedure you described is the proper re-initialization procedure, so it's time to check the tires.

Measure the rolling diameter of each tire by one of two methods. With all four tires at equal pressure, put the vehicle on jack stands and measure the circumference of each tire with a tape measure. Or park the vehicle on dead-level ground with the steering straight, mark with chalk the pavement and each tire at the tire's center-bottom point, roll the vehicle straight forward one tire revolution and recheck each tire's chalk mark. All four marks should be at bottom center of each tire. If not, mark the pavement at each tire chalk position and measure the distance between each mark with a tape measure. This will measure the circumference of each.

Since the indirect TPM system on your vehicle uses the ABS wheel speed sensors to "look" for a wheel/tire rotational speed difference caused by low tire pressure reducing the rolling circumference of a tire, I can't help but be suspicious of the warranty replacement tire. If it is more than about 3 percent larger in circumference, it may be triggering the TPM system due to its larger circumference and different rotational speed.

L L L

I would like to know what is going on with my 1998 Toyota 4-Runner. The engine makes this growling, groaning noise. It sounds like a power steering pump but the noise only appears when the weather is cold. During warm weather it hardly makes any noise. It has 160,000 miles on it, has plenty of pep and runs like a champ. I do not have any problems steering the car. Do you have any suggestions?

Have you ever had the power steering system flushed and refilled with fresh fluid? After 16 years and 160,000 miles, aerated and contaminated power steering fluid may well be causing the whine in cold weather. First, try adding a couple of ounces of SeaFoam Trans-Tune or similar power steering fluid additive. Better yet, have the system flushed and refilled with new fluid. I'll bet this stops the whine.

L L L

Recently on a road trip I was passed by a car on which one of its rear tires appeared to be bouncing up and down. A few miles up the road, it was stopped. That tire had blown out and had taken most of the back bumper with it. What causes a tire to be vibrating like that when cruising on the interstate at 75 miles an hour?

An ignorant motorist. I can't imagine the driver not feeling the vibration from that wobbling tire at that speed. Unfortunately, I've seen more than enough evidence of major problems that potentially affect vehicle safety being completely ignored by the motorist, primarily because nothing had happened yet.

In this case, I would suspect two possibilities. First, a tire that has suffered a structural failure or belt separation in the carcass or a progressive separation of the tread, which could explain the rear bumper damage. Secondly, a dead shock absorber/strut on that corner of the vehicle. The uncontrolled up-and-down movement of the wheel could lead to this type of tire failure eventually.

The moral of the story? If it doesn't look, feel, sound, smell or drive right, stop and investigate why. Not sure if anything's wrong? Have it checked out by a professional.

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BMW’s SUV runs like a hot rod

Some cars you just know are fast, others have a flashy appearance to compensate for a lack of performance and then there's the 2014 BMW X5, a hot rod disguised as a sport utility vehicle.

Our $73,000 X5 tester was the top-shelf 50i model with a twin turbocharged 4.4-liter, V8 engine. BMW seamlessly blends luxury and cargo capacity in its flagship all-wheel-drive SUV and leaves it up to the driver to discover the X5's astonishing power and coupe-like handling.

BMW actually calls the X5 a "sport activity vehicle" rather than an SUV, which I agree better suits our tester, considering the X5's low ground clearance and 20-inch, low-profile tires. While the X5's sophisticated all-wheel-drive provided peace of mind when I got caught in sleet and then snow on an early spring commute, this BMW, with its robust exhaust note, seemed better suited for the drag strip than picking its way along a rocky dirt road.

When I took the wheel of the X5, I had only a vague notion of the beast under the hood. The first few days, I soaked up the interior's distinctive European leather aroma and dialed in the seemingly infinitely adjustable driver's seat that provided firm support with just enough comfort. I focused on the superb handling that kept the X5 flat through the corners with a decent amount of steering feedback.

Initially, I drove the compact SUV the same way I drive my own car, using the cruise control to conserve fuel. One day on my way to work, I thought I forgot my laptop. I pulled off the highway to check, and sure enough it was in the back. Now I had to find a gap in traffic and get the X5 up to highway speed. I toggled through the X5's drive modes from "Eco Pro," which boosts fuel economy, and the road- dulling "Comfort" mode to the "Sport Plus" mode, which ramps up throttle response, adjusts the shift points of the 8-speed transmission and stiffens the suspension.

After waiting for traffic to clear, I stomped the accelerator. The BMW's 445 horses came to life and I was thrust into my seat. The sides of the road blurred and the 
tachometer jumped far to the right with each precision shift. Cars in the rearview mirror vanished and glancing at the speedometer, I was suddenly well beyond the 5-10 miles per hour of speed limit grace that most state troopers grant motorists. I laid off the accelerator and set the cruise control to an appropriate speed. I couldn't wait for the toll booth up ahead to do it all over again.

City fuel economy at 14 miles per gallon is certainly a downside to the X5's powerful V8 engine. BMW does offer the X5 with a turbo-charged inline 6-cylinder and a diesel option as well, both of which greatly improve the SUV's fuel economy. On top of the $68,000 base price, the X5 has several trim packages. We had the $3,600 M Sport line, which includes upgraded seats and transmission along with "M" badging on the steering wheel, foot rest, and door sills. The X5 50i is a bit overpriced considering the absence of safety technology such as adaptive cruise control, blind spot warning and lane departure warning, some of which are available at an extra cost.

Even with a large rear cargo area that expands with fold-down rear seats, the X5 was a thrill to drive, and it lives up to BMW's reputation, a well-built luxury car with an emphasis on performance.

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