News
Troubled electronics giant plans to fill the void by driving sales of S7, S7 Edge smartphones.
Samsung on Friday announced that discontinuing the Galaxy Note 7 will wipe approximately mid-3 trillion won (€2.4 billion) off its operating profit for the next two quarters.
Fourth quarter 2016 earnings will be hit to the tune of approximately mid-KRW2 trillion, with the remaining KRW1 trillion impacting first quarter 2017 earnings.
This is the second profit warning issued by Samsung this week; the company slashed its third quarter guidance on Wednesday.
"The company is releasing these estimates to inform the market on the impact of the Galaxy Note 7 discontinuation," Samsung said, in a statement.
The company killed off its flagship smartphone after a bungled recall programme failed to eradicate a persistent battery problem that caused it to catch fire.
While the financial cost has been counted, the damage to Samsung’s brand and reputation is harder to ascertain.
"Heads are almost certain to roll," said Radio Free Mobile founder Richard Windsor, in a research note.
"Samsung depends on the fact that it out-ships its next Android competitor Huawei by 2.7 devices to one for its high profitability, and if Huawei can close the gap due to this mess, then the damage could be much greater," he said, adding that Huawei and Google "are in pole position to benefit from Samsung’s woes."
Indeed, Samsung will have to work hard to ensure that its next flagship device launch sends a clear message that its fiery Note 7 problems are behind it.
In the meantime, Samsung said it "plans to normalise its mobile business by expanding sales of flagship models such as the Galaxy S7 and Galaxy S7 Edge."
Unsurprisingly, the company said it will also "focus on enhancing product safety for consumers by making significant changes in its quality assurance processes."
