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Samsung Electronics Anticipates Another $3.1B Loss From Galaxy Note7's Exit, Investigates Causes of the Problem

by YuGee / Oct 14, 2016 06:09 AM EDT
A Samsung Electronics Co. Galaxy Note 7 smartphone is submerged in water to demonstrate the water-resistant capability of the device during a media event in Seoul, South Korea, on Thursday, Aug. 11, 2016. Samsung's large-screen Galaxy Note 7 smartphone ca

On Friday, Samsung Electronics admitted that ending the production of the Galaxy Note7 smartphone would possibly hurt the company's operating profit by additional $3.1 billion in the next two quarters.

A report from the Korea Times stated that the company has already lowered its estimate for third-quarter operating profit by 2.6 trillion won (US $2.3 billion). Samsung claimed that the new estimated profit for the earnings in the third quarter showed "the direct cost from the discontinuation of the Galaxy Note7 sales."

In a statement, Samsung said, "The additional lost opportunity cost is estimated in the mid-2 trillion-won range for the fourth quarter of 2016 and at approximately 1 trillion won for the first quarter of 2017. Moving forward, Samsung Electronics plans to normalize its mobile business by expanding the sales of flagship models, such as the Galaxy S7 and Galaxy S7 Edge. Additionally, the company will focus on enhancing the product safety for consumers by making significant changes in its quality assurance processes."

On Thursday, the company promised that it will investigate the reason behind the issue of the Galaxy Note7. Officials of the company said that Mobile Business President Koh Dong Jin mentioned in an email to the employees that they will "thoroughly investigate the fundamental causes so that all customers will be able to trust Samsung's products and enjoy using them."

Koh also tried to console and give encouragement to the employees saying, "W have quickly and courageously faced the biggest risk in our business division ever during the last few weeks. I feel deeply sorry and grateful to our employees for their consistent support and trust. We will regain confidence and trust in our products by eliciting the causes even though it takes time."

Koh also stressed the importance of restoring customer confidence as the main reason why Samsung is trying its best to expedite the investigation into the causes of the fires. Samsung also needs to quickly come up with a resolution to prepare for its next flagship smartphone, which many believes to be the Galaxy S8.

Experts said that the company should not rush the launching of the S8 until Samsung can assure consumers that battery fires will not occur again.

Noh Geun Chang, HMC Securities Analyst said, "Launching the S8 earlier than planned is the last thing that Samsung Electronics should consider. Making sure that such an incident will never happen again through thorough product quality checking is the most important thing now."

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