The Galaxy Note 7 recall might cut Samsung's profit by $740 million

The Galaxy Note 7 recall might cut Samsung's profit by $740 million
Samsung is definitely going to pay dearly for messing up with the Galaxy Note 7's launch. Last week's official statement confirming the Galaxy Note 7's recall must have been the hardest the smartphone company had to issue in a very long time.

Since this isn't just damaging the company's image, many analysts were fast to offer their predictions regarding the costs of such a major recall.

Hwang Min-sung, an analyst at Samsung Securities, offered his view on the cost of the Galaxy Note 7's recall and said he expects Samsung to pay $108.5 million, which includes the replacement process.

This is the amount that Samsung will have to pay to recall and replace all the Galaxy Note 7 phablets that have already been shipped to customers and retailers. However, the spending doesn't stop here since most of the Galaxy Note 7 devices that will be produced in September will be used for the replacement program.

Basically, this means that the Galaxy Note 7 will sell less than previously predicted, so Samsung might end up with just 3 million units sold from 6 million units estimated for Q3 2016.

Due to the manufacture of the replacement units and less sales, Samsung's operating profit could be cut by approximately $360 million. Also, in Q4 2016, the recall program is estimated to cost around $270 million, said the analyst.

According to Hwang, “the recall is a negative factor in the short term but will surely be a wise decision because other alternative measures are unlikely to help Samsung regain confidence from consumers and investors.”

So, to sum it up, Samsung's operating profit might be cut by around $740 million by the end of this year, if we are to believe the numbers estimated by Samsung Securities' analyst.



source: Korea Herald

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61 Comments

1. SayMobile

Posts: 152; Member since: Jan 29, 2014

But it will surely regain back confidence from consumers and investors. $735 million is hardly a ten days profit for samsung which it can easily live with. Kudos to the most innocative tech company to take the very right measures and for putting the customers interest at the top. Note 7 will surely bounce back , coz you just cant suppress the greatest smartphone ever made so easily .

8. willywanta

Posts: 497; Member since: Jun 04, 2014

Yes. Samsung reacted well, and took action immediately. Unlike another fruit company that blamed the customer when their product showed flaws #antennagate

10. Settings

Posts: 2942; Member since: Jul 02, 2014

I believe Note 7 will never bounce back. Samsung will likely to improve it's successor, the Note 8. Exploding batteries is forever tagged in the Note 7 name thus concentration on the new Note.

32. Droid773

Posts: 49; Member since: Dec 22, 2012

I just cracked my Note 7 screen. Do you think Sammy will still replace my phone? Thank you!

48. tedkord

Posts: 17047; Member since: Jun 17, 2009

Probably.

2. Plasticsh1t

Posts: 3088; Member since: Sep 01, 2014

Other companies should take the opportunity to take sales from Samsung.

7. willywanta

Posts: 497; Member since: Jun 04, 2014

they surely will, especially Apple. Sony need to act immediately if they want to gain momentum.

25. Podrick

Posts: 1283; Member since: Aug 19, 2015

Best time for LG to market V20 right! Opportunities like this don't come everyday.

16. tedkord

Posts: 17047; Member since: Jun 17, 2009

They'll try.

28. Bernoulli

Posts: 4358; Member since: Sep 01, 2012

and succeed, the note 7 will now have a bad reputation with the world, sammy can ride the galaxy s7 wave though.

30. tedkord

Posts: 17047; Member since: Jun 17, 2009

Actually, it'll have a great reputation, due the the quick action Samsung took.

38. Bernoulli

Posts: 4358; Member since: Sep 01, 2012

"Quick" action (2 weeks after official launch) that didn't have proper testing in real life situations is by no means something that deserves reputation. It's the least they could've done.

49. tedkord

Posts: 17047; Member since: Jun 17, 2009

Yes, very quick action. No procrastinating, immediately investigated, found the issue and announced full replacement in days. Some companies still haven't taken responsibility for their phone issues even though it's been years.

56. Bernoulli

Posts: 4358; Member since: Sep 01, 2012

Like apple? true, and that's why they leave a bittersweet feel in this website. But that's not quick, it shouldn't have happened in the first place.

3. adi9764

Posts: 119; Member since: Feb 16, 2016

i like samsung but they had it coming.

4. DeusExCellula

Posts: 1390; Member since: Oct 05, 2014

iPhone 7 Release is going to drop the hammer on Samsung.

29. darkkjedii

Posts: 30687; Member since: Feb 05, 2011

Notes and IPhones cater to a different segment. Those who want a Note, will simply wait till they go back on sale and get one.

31. tedkord

Posts: 17047; Member since: Jun 17, 2009

Yep. Wouldn't trade it for any other phone.

34. darkkjedii

Posts: 30687; Member since: Feb 05, 2011

Nor would I. I'd have to carry two, which I do, and one will be a Note.

50. tedkord

Posts: 17047; Member since: Jun 17, 2009

If they passed a law that you could only own one phone, which would it be?

60. darkkjedii

Posts: 30687; Member since: Feb 05, 2011

As they sit now, a Note. The S-Pen, and multitasking features would be the deciding factor. Also Samsung cloud, I like that it backs up now.

5. BradyCrack

Posts: 835; Member since: Dec 29, 2015

How can you see into my eyes, like open doors Leading you down into my core Where I've become so numb, without a soul My spirit's sleeping somewhere cold Until you find it there and lead it back home Wake me up, wake me up inside I can't wake up, Wake me up inside, save me, Call my name and save me from the dark, wake me up Bid my blood to run, I can't wake up Before I come undone, save me Save me from the nothing I've become Now that I know what I'm without You can't just leave me Breathe into me and make me real, bring me to life Wake me up, wake me up inside I can't wake up, Wake me up inside, save me, Call my name and save me from the dark, wake me up Bid my blood to run, I can't wake up Before I come undone, save me Save me from the nothing I've become I feel like this song suits the situation, #dicksoutforsamsung

18. SR-72

Posts: 183; Member since: Sep 01, 2016

Wake me up before you go-go....

6. willywanta

Posts: 497; Member since: Jun 04, 2014

so no Christmas bonus for the executives eh?

9. cosmin.v

Posts: 48; Member since: Aug 22, 2016

Kind of :) Or maybe they'll be halved?:)

11. HugoBarraCyanogenmod

Posts: 1408; Member since: Jul 06, 2014

Hate to say this but the truth always hurts.... nOoNeMaKeSmOnEyFrOmAnDrOiD

14. BradyCrack

Posts: 835; Member since: Dec 29, 2015

God that was hard to read!

15. Fona13A unregistered

Go back to eating stinky tofu

17. tedkord

Posts: 17047; Member since: Jun 17, 2009

The funny thing is, even after this, Samsung will likely still make a fortune from Android.

12. rkoforever90

Posts: 407; Member since: Dec 03, 2011

in my country the government has ordered to halt the sale of the phone, and it become some kind of national news appearing on the front page of the phone

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