Roger Fingas
Samsung Electronics on Wednesday cut its third-quarter operating profit estimates by $2.3 billion, suggesting the amount of damage done by ending production of the Galaxy Note 7.
Profits are now expected to come in at $4.63 billion, Samsung said in a regulatory filing seen by Bloomberg, all but eliminating the amount analysts anticipated the company's mobile division to contribute. One analyst with HMC Invesment Securities, Greg Roh, noted that the profit hit implies Samsung is calculating not just lost sales but the costs of dealing with stocked components and channel inventory.
The company could continue to suffer in later quarters, in no small part because the Note 7 was intended to be a challenger to Apple's iPhone 7 and other high-profile smartphones. While the Galaxy S7 and S7 Edge have proven popular, they were released in early 2016, and Samsung won't have any updated flagship phones until next year.
Over half of Samsung Electronics revenue comes from outside its mobile division, reducing some of the impact. In fact chip and display sales are thought to be on the upswing.
The Note 7 was only released in August but saw a disastrously short existence, with repeated battery fire incidents around the world. Samsung attempted a recall, but with even fixed units displaying the same problem, the company decided to kill off the product on Tuesday rather than risk its reputation.
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31 Comments
Hahahaha.... :D
I think, almost 4 weeks in, that we'd normally be expecting projected ship times for iPhone orders to be reeling in.
The fact that, for the most part - and especially for the 7 Plus - they haven't been reducing, might be one measure
of just how much this is going to benefit iPhone."Samsung - Setting the World on Fire Since 2016"...
Sell your stock NOW.
" . . . the costs of dealing with stocked components and channel inventory."
Like fireproof boxes, fireproof containers for shipping back to Korea, and extra fire and liability insurance to cover untold thousands of locations where the Note 7s are lurking, waiting to burn?
By the way, the best explanation if the problem I've seen so far was in the original Bloomberg report on the "rush to beat Apple" story, filed by their Korea-based staffers. They said the barreries are being squeezed too tightly by the case and components. Has anyone seen anything for or against this theory?
Edit: here's a quote from the Bloomberg story:
"Samsung engineers rushed to determine the cause of the problem, working through the Harvest Festival holiday last week. The company’s most complete explanations so far have come in reports to government agencies in Korea, China and the U.S. The initial conclusions indicated an error in production that put pressure on plates within the battery cells. That in turn brought negative and positive poles into contact, triggering excessive heat that caused the battery to explode.
"The chairman of the U.S. Consumer Product Safety Commission was more explicit when his agency announced an official recall on Thursday. He said the phone’s battery was slightly too big for its compartment and the tight space pinched the battery, causing a short circuit. “Clearly, they missed something,” said Anthea Lai, an analyst with Bloomberg Intelligence. “They were rushing to beat Apple and they made a mistake.”
Ouch!!!