Roger Fingas
Samsung Electronics' estimated operating profits grew 5.6 percent in the third quarter in spite of its massive Galaxy Note 7 recall, buoyed by increased chip and display sales.
Operating profits are thought to have been approximately $7 billion, up year-over-year from around $6.7 billion, Reuters reported, even though revenues were down 5.2 percent to about $44 billion. More precise numbers are only due in late October.
Samsung didn't say what sort of impact the Note 7 recall had, but outside analysts have speculated that the damage could be $897 million or more. The company ordered about 2.5 million units recalled, and it's not yet clear that the fixed phones are much safer.
The incident may have ironically helped the company's chip division, as the sudden need for chips in replacement phones may have put a crush on an already stretched memory market, pushing up prices. Smartphone makers — including ones trying to seize on Samsung's mistakes — may be scrambling to claim what's left of a limited supply. Research firm TrendForce is predicting that DRAM chip prices will jump by more than 10 percent in the December quarter.
Also helping Samsung may be the Galaxy S7 and S7 Edge, the company's well-reviewed flagship phones, which have been out for some time but have enjoyed healthy sales.
Charles Martin
Malcolm Owen
William Gallagher
Christine McKee
Wesley Hilliard
Andrew Orr
18 Comments
the new pyramid scheme...destroy one segment of your business to boost another...
Best Buy is now offereing a free 32" tv and Gear VR Headset with purchase of Galaxy 7
The key piece of info in this report? "Samsung didn't say what sort of impact the Note 7 recall had."
Hmm. It's like the dog that didn't bark.
Says all all you need to know about whether you should buy this stock.
If that story about the replacement Note catching fire turns out to be more than just a fluke occurrence then the long term damage to Samsung's brand (and therefore pricing power and market share) will dwarf the short term replacement costs.
On the other hand, if the replacement process goes smoothly and if they can avoid any other big quality issues for the next year, then they can probably recover. I think consumers are understanding up to a point.
Wait until next quarter. Will be horrific. Besides the Samsung fanatics, the "regular" folks are steering clear of the Note. I personally know three people who bought Notes and are returning them permanently and getting another phone from a different company. I don't know what their replacement phones will be, but still, not good.