Samsung’s Galaxy Note 7 Fiasco to Cost Firm $2.3 Billion in Q3 2016 Profits

Samsung’s Galaxy Note 7 Fiasco to Cost Firm $2.3 Billion in Q3 2016 Profits

Bloomberg reports the Samsung Galaxy Note 7 recall fiasco has led the South Korean firm to cut its third quarter 2016 operating profit expectations from 7.8 trillion won ($6.9 billion) to 5.2 trillion won ($4.6 billion), a $2.3 billion drop.

Samsung's Galaxy Note 7 Fiasco to Cost Firm $2.3 Billion in Q3 2016 Profits


The company’s projection “effectively erases all the mobile business profit that analysts had been projecting,” with revenue expected to dive from 49 trillion won to 47 trillion won. On the wave of Samsung’s woes, Apple shares reached a record high this year, but Samsung had yet to divulge its potential quarterly loss. 

“This is a huge cutback,” said Greg Roh, an analyst at HMC Investment Securities Co told Bloomberg. “It means Samsung has reflected not only the sales loss from the shutdown but it also means it would bear the costs of the inventories of Note 7s in the channel as well as the components they bought a few months back.”

Samsung and Vice Chairman Jay Y. Lee are struggling to contain fallout from the troubled Note 7 phones, which were overheating and catching fire even after a recall that was supposed to fix the problem. The Suwon-based company said Tuesday it would kill this generation of the high-end phone and then cut third-quarter guidance today, less than a week after it was first issued.

Samsung’s shares have continued to fall in value, as reports of new Galaxy Note 7-related fires emerged. The stock has dropped 10% in the past three trading days, bringing a drop of $21 billion from its market value.

The company is expected to remain profitable for the quarter, saved by its manufacturing division, which produces semiconductors, glass panels, appliances, and more.

Samsung hasn’t announced what the Galaxy Note 7 fiasco might cost it in future quarters. The device was expected to lead the charge in the company’s battle for smartphone market supremacy against competitors such as Apple’s iPhone, as well as devices from Google and Huawei Technologies Co.