Though Galaxy Note 7 was one of the best flagship devices, it has brought a truckload of bad luck for Korean tech behemoth Samsung. The smartphone, original or replaced, has caused mass panic among the populous due to its exploding capabilities. Thus, the company has ensued global recall and replacement procedures twice, and this has caused them unexpectedly high losses.
Samsung has today released a statement which estimates that the ultimate death of its flagship device, Galaxy Note 7, with exploding features will cost them about 3 trillion won(approx. $3.1 billion) over next two fiscal quarters. The company further breaks down its projections for both quarters. It expects an estimated loss of mid-2 trillion won( about $2.2 billion) in fourth quarter 2016, and approx. mid-1 trillion( about $0.9 billion) in first quarter of next year.
[Samsung] estimates a negative impact of approximately mid-3 trillion won in operating profit from the fourth quarter of 2016 through the first quarter of 2017, due to the discontinuation of Galaxy Note7 sales,
reads the official statement.
This news comes at the heels of reduction in operating profit forecast by 33.3 per cent for the third quarter. It had earlier predicted that the global recall of the Galaxy Note 7 wouldn’t drag profit figures in Q3 due to increased chip and consumer tech business. But, during that time, the Korean giant has just started the replacements and didn’t expect them to start bursting into flames as well.
Thus, it had to finally pull the plug on its latest flagship, Galaxy Note 7, just within eight weeks of its launch. It didn’t want to continue to neglect the safety of its customers and announced another recall for the demise of the device. The company has not only sent out fireproof boxes for safe return of devices, it also revaluated projected estimates. The current projected figures, after removing $2.3 billion, now stand at $4.6 billion which is far lower than analyst estimates. This revision in earnings call already allocates the expected direct cost from the discontinuation of Galaxy Note 7 sales.
In addition, Reuters also reports that the recall of both original and replacement devices, i.e over 2.5 million, could cost the Korean giant as much as $17 billion. This figure could be even bigger as the company projection of selling over 19 million Note 7 devices during its product cycle no longer stands tall on its promises.
Samsung has also said that the previous Galaxy S7 and S7 Edge models are completely safe and it is, thus, boosting its sales to normalize the scattered pace of its mobile business. With this exploding fiasco (almost) in the hindsight, the company promises to lay more focus on safety.
Moving forward, Samsung Electronics plans to normalize its mobile business by expanding sales of flagship models such as the Galaxy S7 and Galaxy S7 edge.
Additionally, the company will focus on enhancing product safety for consumers by making significant changes in its quality assurance processes,
reads the official statement.
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