Korean conglomerate (chaebol) owners utilize interlocking relationships between companies in order to maintain control despite having only a minority ownership[0,1]. This can cause lots of corporate governance issues, such as when family disputes end up affecting companies[2].
Look at the Hanjin mess. The chaebol decided not to bail out the shipping business unit, which is now bankrupt and shutting down. (Today was the last day to claim your container and make arrangements to move it if it's stuck on a Hanjin ship.)
But Samsung isn't in serious trouble. It's just not paying out enough to investors.
At least one of the major candidates in next years South Korean presidential election (Lee Jae-myung, recently dubbed the "Korean Trump" [1]) is running on a platform of dividing up the chaebol. He is not the frontrunner, but maybe Samsung is partially trying to mitigate their risk with this move.
Without commenting on the corporate governance side of things, being vertically integrated at Samsung's scale has a lot of advantages - boosting the profitability of the phone division at the 'expense' of the battery and display divisions probably unlocks more "shareholder value" in the long term than having the individual divisions finding their local profit maxima as separately listed companies.
It makes sense for the high-margin divisions to 'subsidise' the low-margin-but-strategic divisions. It also makes sense from a vision perspective - "here is the ideal phone we would like to sell in 10 years, all divisions, do the necessary R&D to make it happen"
Part of the problem they're trying to solve is the outsized role the electronics division is playing in the conglomerate. The entire company is worth something like half a trillion dollars (about twice Apple), but something like half of that is the electronics component alone (my numbers might be a bit off, but the order of magnitude should be about right).
Because of the interlocking structure of Korean conglomerates, ill performing companies in the conglomerate can stay propped up by the others, creating a drag on the successful parts, while simultaneously making it harder to figure out which parts are doing well and which are not.
There's other issues to, like family ownership being deeply tied into the conglomerate (which should be publicly traded). This has created a "royal" class of citizens who have a very outsized influence in society even if all they've done was to be born and have their parents put them in charge of a small holding company to learn the ropes. The influence peddling scandal in Korea is also revealing how deeply intertwined and corrupt the relationship between the government, these families and these companies are, and the net result is that citizen investors (stock holders) aren't getting the maximum benefit they could from a more transparent and accountable corporate structure.
Samsung in particular has a huge role in the Korean economy, accounting for something like 10% of the national GDP.
>The entire company is worth something like half a trillion dollars (about twice Apple)
Um..... Apple is worth about 600B now, ( And it is heavily under value in todays valuation ), how is half a trillion dollar; 500B worth twice as Apple?
Apple has assets of around $321.686 billion, whereas Samsung is worth around 1.64601505816 times more with assets of around $529.5 billion. Therefore Apple is not only worth less than Samsung, but is heavily over valued.
So Samsung has an Market Cap of 500B and Asset of 529?
What are those asset? How many of them are cash? What is its P/E? This is like saying the largest insurance has trillion of asset and therefore they are all under valued.
Apple has over $200B in cash alone. And does close to $40B a year in profits. Calling them heavily overvalued when their market cap is only $600B is ridiculous.
Talking about assets as if they are that important is so weird. How would you rate finance companies and other sorts of companies with tons of assets. They would be insanely undervalued according to your "analysis"
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[ 4.1 ms ] story [ 34.1 ms ] thread0: http://www.esadegeo.com/download/PR_PositionPapers/43/ficPDF...
1: http://onlinelibrary.wiley.com.sci-hub.cc/doi/10.1111/1467-8...
2: http://www.bloomberg.com/news/articles/2016-09-29/death-prob...
But Samsung isn't in serious trouble. It's just not paying out enough to investors.
[1]: http://www.bloomberg.com/news/articles/2016-11-24/harnessing...
It makes sense for the high-margin divisions to 'subsidise' the low-margin-but-strategic divisions. It also makes sense from a vision perspective - "here is the ideal phone we would like to sell in 10 years, all divisions, do the necessary R&D to make it happen"
Because of the interlocking structure of Korean conglomerates, ill performing companies in the conglomerate can stay propped up by the others, creating a drag on the successful parts, while simultaneously making it harder to figure out which parts are doing well and which are not.
There's other issues to, like family ownership being deeply tied into the conglomerate (which should be publicly traded). This has created a "royal" class of citizens who have a very outsized influence in society even if all they've done was to be born and have their parents put them in charge of a small holding company to learn the ropes. The influence peddling scandal in Korea is also revealing how deeply intertwined and corrupt the relationship between the government, these families and these companies are, and the net result is that citizen investors (stock holders) aren't getting the maximum benefit they could from a more transparent and accountable corporate structure.
Samsung in particular has a huge role in the Korean economy, accounting for something like 10% of the national GDP.
Um..... Apple is worth about 600B now, ( And it is heavily under value in todays valuation ), how is half a trillion dollar; 500B worth twice as Apple?
Talking about assets as if they are that important is so weird. How would you rate finance companies and other sorts of companies with tons of assets. They would be insanely undervalued according to your "analysis"