Galaxy Note 7 fiasco slumps Samsung profit by 30 percent

Samsung has reported 30 percent decline in profits after the Samsung Galaxy Note 7 fiasco. In a statement issued on October 27, the company disclosed that the profit reflects an expected 30 percent decrease in profit. The main reason for the splurge in profit is attributed to the recall and stoppage of production of Note 7 after a series of explosions.

Samsung added that the overall operating profit from July to September stood at KRW 5.2 trillion (Rs. 30,772 crores), which is comparatively less than KRW 7.3 trillion for the same period in 2015.

The latest profit figures are in tune with a revised earning estimate issued by Samsung two weeks earlier. The company predicted the decline in earnings when it had to recall the Note 7 handsets and subsequent termination of production.

According to industry analysts, the decision to stop production of a flagship Galaxy Note 7 devastated the company. During the launch events, the company had themselves stated that they are working hard to improve quality using cutting-edge technologies.

Samsung said that the mobile unit of the company would focus not only on expanding sales of new flagship products but also regain customer’s confidence. The overall impact of the Galaxy Note 7 fiasco is still being arrived at. The company predicts another $3 billion in lost profits over the next two quarters.

Commenting on the development, Greg Roh, an analyst at HMC Investment Securities said that the mobile business hit bottom, but it should pull off a partial recovery in the fourth quarter where we will be looking for an operating profit of roughly KRW 2 trillion.

However, Roh said that the full recovery will happen by the end of Q2 2017 since the company is expecting great sales for its upcoming Galaxy S8 smartphone. The company is expected to showcase the new Galaxy S8 and Galaxy S8 Edge during the upcoming MWC.

It’s true that Samsung has lost consumer confidence. But we have to give Samsung another opportunity to enable them to prove, added Roh.

Instead of rushing to release the new product, the company should carry out a series of inspection to find out what was wrong with Galaxy Note 7. The company should reveal the results to the public to regain confidence among lost customers.

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