Samsung now projects $5.3B hit on profits from Note 7 fires

Posted:
in General Discussion
As a result of having to recall and eventually kill off the Galaxy Note 7, Samsung on Friday predicted a further $3 billion reduction in operating profits through March 2017, beyond the $2.3 billion it already announced.









The sum comes on top of an estimated $2.3 billion hit to third-quarter profits Samsung Electronics disclosed on Wednesday, according to Bloomberg. About $2 billion of the additional impact should come in the December quarter, the remainder in Q1 2017.



In the meantime, Samsung said it's hoping to compensate by growing sales of the Galaxy S7 and S7 Edge, released earlier this year. Those phones have proven popular -- the Note 7, however, was intended to be Samsung's direct challenge to Apple's iPhone 7 and 7 Plus.



That may ironically have been the cause of the company's problems, with rushed production schedules indirectly leading to battery fires. A later recall failed to halt fire incidents.



In spite of the major blow to the company's finances and reputation, Samsung Electronics is likely to remain in the black, mostly because of chip and display sales. The company is a major components supplier, Apple in fact being one of its clients. Less than half of its revenue comes from its mobile division.
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Comments

  • Reply 1 of 54
    I like the fact that Apple is not publicly gloating the way Samsung would if the shoe were on the other foot. Sammy would feature exploding iPhones in their ads. Apple is showing real corporate class by just keeping on keeping on. Not that Samsung will learn anything from Apple's example. 
    jony0mwhitestompypatchythepiratecanadiandudegilly33douglas baileyzroger73magman1979mobius
  • Reply 2 of 54
    maestro64maestro64 Posts: 4,371member
    I do not believe this number, I think Samsung is jacking up the number. They are trying to send a signal to the market that demand for the galaxy 7 is higher than reality. I also believe the rolling up other costs and loses they have and using the opportunity to expense them all at the same time so it does not look bad they have other issues. I have seen companies do this exact thing in the past.
    patchythepiratefracpalomineGerry-Aam8449jahbladepscooter63ronncaliviclauyyc
  • Reply 3 of 54
    I like the fact that Apple is not publicly gloating the way Samsung would if the shoe were on the other foot. Sammy would feature exploding iPhones in their ads. Apple is showing real corporate class by just keeping on keeping on. Not that Samsung will learn anything from Apple's example. 
    Agreed. Corporate class would be the only other thing that they don't copy from Apple, along side the environmental initiatives.
    canadiandudeh2pcoolfactorrazorpitronncaliwatto_cobra
  • Reply 4 of 54
    irelandireland Posts: 17,491member
    Don't forget the permanent hit to their brand. Don't buy a Samsung, they cut corners on safety to rush products to market. Only a fool would trust Samsung again. If you want an Android phone there are many options besides this bum outfit.
    edited October 2016 canadiandudegilly33magman1979h2pbdkennedy1002jahbladecoolfactorrazorpitronncali
  • Reply 5 of 54
    irelandireland Posts: 17,491member
    sog35 said:
    This is what happens when you have so much courage and pack some much innovation into a single device
    Yeah sarcasm is fun and all but they risked people's lives to beat iPhone 7 to market. They were incredibly responsible.
    longpath
  • Reply 6 of 54
    irelandireland Posts: 17,491member
    I like the fact that Apple is not publicly gloating the way Samsung would if the shoe were on the other foot. Sammy would feature exploding iPhones in their ads. Apple is showing real corporate class by just keeping on keeping on. Not that Samsung will learn anything from Apple's example. 
    They aren't worthy a mention.
    caliwatto_cobra
  • Reply 7 of 54
    macxpressmacxpress Posts: 4,681member
    I like the fact that Apple is not publicly gloating the way Samsung would if the shoe were on the other foot. Sammy would feature exploding iPhones in their ads. Apple is showing real corporate class by just keeping on keeping on. Not that Samsung will learn anything from Apple's example. 
    It doesn't need to. I don't really think Apple has ever been on this I gotta twist the knife a little deeper when a competing company has issues. Apple just needs to stay focused on what its doing and not worry about other companies (good or bad).
    canadiandudegilly33jahbladepscooter63caliwatto_cobra
  • Reply 8 of 54
    rob53rob53 Posts: 1,949member
    maestro64 said:
    I do not believe this number, I think Samsung is jacking up the number. They are trying to send a signal to the market that demand for the galaxy 7 is higher than reality. I also believe the rolling up other costs and loses they have and using the opportunity to expense them all at the same time so it does not look bad they have other issues. I have seen companies do this exact thing in the past.
    If Samsung is actually recalling all the Galaxy 7's, they might have included all operational costs associated with the device, including all specialized manufacturing equipment and maybe even design work (should be a very small amount). Add in the component costs, even those from other Samsung divisions, and they could easily have a loss in the $5B range. I don't see these as actual profits but the way accountants fiddle with the numbers, maybe Samsung gets to take everything off as if they were going to be profits. Kind of like Trumpconomics. 
    palominejahbladeronncaliwatto_cobraviclauyyc
  • Reply 9 of 54
    macxpressmacxpress Posts: 4,681member
    The $5.3 billion is just the tip of the iceberg....its nothing compared to the tarnished reputation its received from this. 
    ericthehalfbeebigmac2magman1979jahbladelongpathcaliwatto_cobranetmage
  • Reply 10 of 54
    macxpress said:
    The $5.3 billion is just the tip of the iceberg....its nothing compared to the tarnished reputation its received from this. 

    Also doesn't include lost sales. The Note 7 would have easily sold 20 million units over the next 9 months. That's $16 billion (give or take) of lost revenue. And since the Note 7 is a high margin device, that also equates to billions in actual profit.
    irelandlongpathcaliwatto_cobranetmage
  • Reply 11 of 54
    bigmac2bigmac2 Posts: 637member
    sog35 said:
    This is what happens when you have so much courage and pack some much innovation into a single device
    I doesn't take much courage to pack too much features on a phone regardless the battery being able to supported it
  • Reply 12 of 54
    cpsrocpsro Posts: 2,424member
    On the bright side, Samsung will have zero expenditures on Android updates.

    Like the successful movie studios that never, ever have a hit production, they're probably attaching every possible expense to the Note 7. And the SK government will allow it because they want their prized behemoth to survive. 
    h2pwatto_cobra
  • Reply 13 of 54
    SoliSoli Posts: 8,433member
    I like the fact that Apple is not publicly gloating the way Samsung would if the shoe were on the other foot. Sammy would feature exploding iPhones in their ads. Apple is showing real corporate class by just keeping on keeping on. Not that Samsung will learn anything from Apple's example. 

    sockrolidronncali
  • Reply 14 of 54
    dougddougd Posts: 213member
    Karma is a bitch
    magman1979irelandjahbladecaliwatto_cobra
  • Reply 15 of 54
    thrangthrang Posts: 751member
    karma
    irelandcaliwatto_cobra
  • Reply 16 of 54
    Too bad it's not going to benefit Apple's value any signficant amount. If one of Tesla's rivals' cars had some huge problem, Tesla stock would have been up 20% by now. With Apple, shareholders might see a 2% share gain over the quarter from Samsung's problems. Still, Apple shouldn't have to depend on another company imploding to get decent sales and the Galaxy Note 7 is only one product in Samsung's huge smartphone arsenal. It appears all the innovation Samsung put into the Note 7 has somewhat backfired on them. Maybe it's not all that wise to rush products to market just to beat out a rival. I'm just saying this in hindsight because it didn't turn out very well for Samsung this time around. I've never really understood that quick-charging tech. It seems somewhat risky unless there's some circuit that really monitors everything happening to the battery. Whatever. Samsung will definitely fix the problem before the Galaxy Note 8 is announced and consumers will probably rush out to buy it due to pent-up demand.
  • Reply 17 of 54
    MacProMacPro Posts: 17,835member
    Heart breaking ...  /stifling laugh
    kuducaliwatto_cobra
  • Reply 18 of 54
    MacProMacPro Posts: 17,835member
    ireland said:
    Don't forget the permanent hit to their brand. Don't buy a Samsung, they cut corners on safety to rush products to market. Only a fool would trust Samsung again. If you want an Android phone there are many options besides this bum outfit.
    They cut 'rounded corners' remember .... ROFL.  BTW Their latest Apple rip off, the cylindrical Samsung computer, is clearly going to double as a camp fire stove too.
    edited October 2016 coolfactorcaliwatto_cobra
  • Reply 19 of 54
    macxpress said:
    I like the fact that Apple is not publicly gloating the way Samsung would if the shoe were on the other foot. Sammy would feature exploding iPhones in their ads. Apple is showing real corporate class by just keeping on keeping on. Not that Samsung will learn anything from Apple's example. 
    It doesn't need to. I don't really think Apple has ever been on this I gotta twist the knife a little deeper when a competing company has issues. Apple just needs to stay focused on what its doing and not worry about other companies (good or bad).
    Agreed. What other companies do or problems they have should not change Apple's plans. I don't really see Samsung's problems helping Apple at all. All Apple needs to do is continue its focus on building good, solid products and keeps its own brand strong. Analysts and Wall Street might hate that strategy, but I think that's the safe way to go for Apple because it's such a high profile company. Any small mistakes are immediately blown out of proportion by the media. The Note 7 is only one product in Samsung's smartphone lineup and those other products seem to be OK. People are buying Samsung smartphones over iPhones because there are more less-expensive smartphone price points than what Apple offers. Branding has probably little to do with it. No matter how good Apple products are, consumers are only going to buy what they can reasonably afford.
    macxpressjahbladecaliwatto_cobra
  • Reply 20 of 54
    mwhitemwhite Posts: 168member
    rob53 said:
    maestro64 said:
    I do not believe this number, I think Samsung is jacking up the number. They are trying to send a signal to the market that demand for the galaxy 7 is higher than reality. I also believe the rolling up other costs and loses they have and using the opportunity to expense them all at the same time so it does not look bad they have other issues. I have seen companies do this exact thing in the past.
    If Samsung is actually recalling all the Galaxy 7's, they might have included all operational costs associated with the device, including all specialized manufacturing equipment and maybe even design work (should be a very small amount). Add in the component costs, even those from other Samsung divisions, and they could easily have a loss in the $5B range. I don't see these as actual profits but the way accountants fiddle with the numbers, maybe Samsung gets to take everything off as if they were going to be profits. Kind of like Trumpconomics. 
    Your comment was good up until you say Trumpconomics this is not the New York Times take that crap to them not here!!
    kuducali
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