Samsung forecasts $5.3B hit from Note 7 debacle - Mobile World Live

Samsung forecasts $5.3B hit from Note 7 debacle

14 OCT 2016

Samsung expects to take a further KRW3.5 trillion ($3 billion) profit hit over the next two quarters, following its decision to discontinue the Galaxy Note 7 over safety issues.

The company earlier this week lowered its Q3 profit guidance by approximately $2.3 billion, and the outlook for Q4 2016 and Q1 2017 means the company will experience total losses of $5.3 billion.

It decided to stop production of the smartphone after consumers reported overheating issues in the devices, released in August.

In a statement, Samsung estimated it would experience a negative impact in the mid KRW2 trillion range for Q4 2016, and approximately KRW1 trillion for the first quarter of 2017.

“The company is releasing these estimates to inform the market on the impact of the Galaxy Note 7 discontinuation,” it said. “Moving forward, Samsung Electronics plans to normalise its mobile business by expanding sales of flagship models such as the Galaxy S7 and Galaxy S7 edge.”

The company said it will also focus on enhancing product safety for consumers going forward, “by making significant changes to quality assurance processes”.

Samsung recalled some 2.5 million Note 7 devices in September, after reports that the phones were catching fire and overheating.

It then began to replace the devices two weeks later, but similar reports emerged, indicating the problem had not been resolved.

Earlier this week, it ended production, told all retail partners to stop selling and exchanging the device, and urged all consumers to switch the phone off.

Analysts speaking to Reuters said further losses resulting from the issue could not be ruled out, while the reputational damage could be even more harmful for the company, particularly in the cut throat smartphone industry.

“The sales impact on other models remains unclear,” said Kim Sung-soo, fund manager at LS Asset Management. “The end of the premium model will damage Samsung’s brand, and hurt demand for other models. It is difficult to measure such impact.”

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Kavit Majithia

Kavit joined Mobile World Live in May 2015 as Content Editor. He started his journalism career at the Press Association before joining Euromoney’s graduate scheme in April 2010. Read More >>

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