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Samsung sees further $3 billion profit hit from Note 7 crisis

When replacement phones also started to combust, the company eventually decided to kill off the Note 7 for good

AFP | PTI  |  Seoul 

Samsung Electronics Galaxy Note 7 smartphones are displayed at its shop in Seoul, South Korea. AP | PTI
Samsung Electronics Galaxy Note 7 smartphones are displayed at its shop in Seoul, South Korea. AP | PTI

said on Friday the crisis over its exploding Note 7 smartphones would cost another $3 billion-plus in lost profit over the next two quarters, but hoped expanded sales of its other flagship handset would help cushion the impact. The profit warning came two days after the electronics giant slashed its operating profit for the third quarter by $2.3 billion. After a recall problem with the large-sized Galaxy Note 7 turned into a full-blown crisis, announced earlier this week that it was scrapping the model entirely — a devastating move for a company that prides itself on the quality production of cutting-edge technology. On top of the third-quarter loss, said the drop in sales arising from the decision to discontinue the Note 7 would continue to impact profit margins during the October-March period — including the crucial holiday buying season. It estimated operating profit loss in the fourth quarter at around the "mid-2 trillion ($2.2 billion) won range" and 1.0 trillion won for the first quarter of 2017. "Moving forward, 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 in a statement. announced a recall of 2.5 million units of the oversized Galaxy Note 7 smartphone in early September after several devices exploded or caught When replacement phones also started to combust, the company eventually decided to kill off the Note 7 for good. The company blamed faulty made by an unnamed supplier — widely believed to be its sister company SDI. But numerous experts and analysts said the problem may have been with the handset's underlying technology, and Samsung's decision to rush the launch of the smartphone ahead of the latest iPhone from arch-rival Apple. In its statement, vowed to "focus on enhancing product safety for consumers by making significant changes in its quality assurance processes." Industry analysts have suggested the Note 7 fiasco could end up costing anywhere between $10 billion and $20 billion, with a lot of the losses tied up with the harder-to-calculate damage done to brand reputation. "And this figure doesn't take into account the huge marketing costs for to win back customer loyalty and to regain the trust of mobile carriers," said Greg Roh, an analyst at HMC Investment Securities.

First Published: Fri, October 14 2016. 09:48 IST
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