Galaxy Note 7 Fiasco Wiped Out 95% Of Samsung’s Profit

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The news that Samsung made a loss in their third quarter earnings does not come as a shock, considering the company recalled their Galaxy Note 7 flagship phone twice due to reports of explosions before finally  pulling it off the market completely.

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Their financial results for Q3 2016 was as lousy as expected on account of this. The company’s mobile division struggled and failed in the end to contain the fallout caused by the Note 7 cancellation.

The company also just barely avoided recording a loss in its IT & Mobile unit, posting 100 billion gained ($87 million) in operating profit.

Note 7

A hundred billion gained may rightly seem like a lot of money but comparisons of that unit’s figures in previous quarters will give one a better idea of how far Samsung fell. In Q2, Samsung Mobile made 4.32 trillion and in Q1 they made 3.89 trillion won. The Q3 earnings brought a 95% drop.

Other units of Samsung, however, fared much better, allowing the company to post a total of 5.2 trillion gained ($4.5 billion) in overall operating profit. Although that is a huge drop from previous quarters, it is still far from a catastrophe. Their component and display businesses did superbly well.

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It is still expected that ripples from the Galaxy Note 7 failure will affect the next quarter, but Samsung says it “will strive to achieve comparable YOY earnings.” Expectations also hold that the Galaxy S7 and Galaxy S7 Edge, as well as new models in the mid to low-end segment will drive Samsung’s profit in Q4.

Note 7

On plans to have a turnaround next year, Samsung counted on its new flagship phones stating;

“Regarding the mobile business, the company will focus on expanding sales of new flagship products with differentiated design and innovative features, as well as regaining consumers’ confidence. Samsung will concentrate on strengthening its competitiveness by continuously enhancing solution capabilities such as KNOX, Samsung Pay and cloud-related and artificial intelligence-related services.”

The company also said that it was taking steps to avoid another repeat of the Galaxy Note 7 happenings stating;

“Going forward, the Company will make significant changes in the quality assurance processes in its commitment to providing safe and reliable products and regaining customers’ confidence.”

Before announcing its earnings for Q3, Samsung had already teased the Galaxy S8 and Galaxy Note 8 and promised that it would make them available at reduced prices to Note 7 users who choose to remain loyal to the brand.

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