Samsung Note 7 Fiasco Loses Expected To Reach $5B
Samsung Electronics said it expected the move to knock about $2.3 billion off its operating profit for the three months to Sept. 30. It forecast a further hit of around $3.1 billion to operating profit for the six months through March 2017 from the fallout of its bungled Galaxy Note 7 recall.
In a worse case scenario, CNN shared Nomura Securities prediction that the decision to ditch the Note 7 would cost Samsung $9.5 billion in lost sales and put a $5.1 billion dent in profit between this month and the end of 2017. The company's stock is down around 8% since October 10.
Samsung is still trying to figure out what caused some Note 7s to burst into flames. The problems with the Galaxy Note 7 began just days after its launch in August. It recalled 2.5 million of the phones in early September, blaming a battery fault. It promised then that replacement devices would be safe. But reports began to emerge of the replacement phones also catching fire, which forced Samsung to give up on the Note 7 product entirely, with one flaming handset leading to the evacuation of a flight in Kentucky minutes before departure, reports CNBC.
Samsung asked carriers and retailers globally to stop sales and exchanges of the Note 7, before announcing that the model was going to be permanently discontinued. The company has been offering customers financial incentives, including $100 credit in the U.S. to trade in their Note 7s for other Samsung phones.
Samsung, which is currently the smartphone market leader by shipment volume, will planned to expand sales of its flagship smartphone models, such as the Galaxy S7 and S7 edge to recover from financial loses. Deutsche Bank analysts said in a Wednesday note that they expected the likes of Apple, LG, Huawei and Sony to benefit in various regions where they compete with Samsung. In China, they expected local high-end Android phones, made by the likes of Huawei, OPPO and vivo, to take "the majority of high-end smartphone share from Samsung."
