Samsung Q3 profits tank as Note7 debacle takes its toll

27 Oct 2016

The debacle may ultimately cost Samsung $6bn and at one point, the company shed $20bn worth of share value. Image: Samsung

Samsung’s third quarter operating profits have fallen 30pc from last year to $4.6bn – the lowest level in two years.

The fiery fiasco that saw Samsung’s brand new flagship phone withdrawn and recalled – after notching up 2.5m in initial sales – has cost the company dearly, both financially and in terms of PR.

Yesterday, the company resorted to an over-the-air software update that limits the Note7’s battery life to 60pc, in order to coax the last 33pc of Note7 phone owners in Europe who have yet to return the device.

The debacle may ultimately cost Samsung $6bn and at one point, the company shed $20bn worth of share value.

Despite this, investors and analysts remain on side with the company and the stock is up 24pc on last year.

Consumers are fickle, however, and Samsung is mustering its forces to recover quickly from the burning phone drama by preparing to dangle new, shiny devices before the masses.

Samsung pins hopes on new flagship phones

The company is aiming to reassure investors and an investigation into the defective battery is underway, to redeem itself after what has become one of the biggest product failures in tech industry history.

In return, investors are expecting sweeping management changes and shareholders have voted heir apparent Jay Y Lee to the board. He is the grandson of the founder of Samsung, Lee Byung-chul, and the son of Samsung chairman, Lee Kun-hee.

“Looking ahead to the fourth quarter, the company expects earnings to improve year-over-year, driven by strong performance in the components business,” Samsung announced.

“The mobile business expects a recovery in its earnings to a similar level with that of the fourth quarter of 2015, led by solid sales of the Galaxy S7 and S7 edge.”

Looking to 2017, Samsung said it anticipates a turnaround with the launch of new flagship smartphones.

“Next year will also see expansion of Samsung Pay roll-outs and cloud-related services, as well as the introduction of artificial intelligence related offerings,” the company said.

“Meanwhile, the Networks business expects to see continued improvement in profitability on the back of 4G LTE expansion in markets around the world.”

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years