Samsung has today issued a revised earnings forecast for Q3 2016, 24 hours after the Korean electronics giant confirmed it was killing its flagship Galaxy Note7 smartphone, following a spate of fires reportedly caused by the device.
Last week, Samsung estimated that its sales from July – September amounted to around 49 trillion Korean won ($43.6 billion), with operating profits weighing in at 7.8 trillion Korean won (around $6.9 billion). Now, sales estimates have been slashed to 47 trillion Korean won ($41.8 billion), with profits expected to be around 5.2 trillion Korean won (around $4.6 billion). In effect, this means that Samsung reckons its operating profits will be one-third less than it believed they would be five days ago, and, as you’d expect, it’s pinning this entirely on the Galaxy Note7 debacle.
According to Samsung:
After recent incidents and in consideration of our consumers’ safety, Samsung Electronics stopped sales, exchanges and production of the Galaxy Note7. Below is a revised pre-earnings guidance which reflects the impact of this decision on the third quarter earnings, in accordance with accounting standards. We are providing the revised guidance based on disclosure regulations of securities market.
Introduced in early August, the new Galaxy Note-branded phablet was initially met with positive reviews, before reports began to surface that some people had encountered exploding batteries that caused their device to catch fire.
Following a vast replacement program extending across multiple carriers and countries, it appeared as though Samsung could emerge from the sorry episode relatively unscathed. But when fresh reports began to surface last week that replacement Galaxy Note7 devices were once again catching on fire, Samsung had little choice but to pull the plug and put the gargantuan smartphone out of its misery — an announcement that sent the company’s stock tumbling 7.5 percent.
What this means for Samsung’s battered Galaxy brand in the long-term remains to be seen, but it’s not beyond the realm of possibility that the tech titan may kill the entire slate of Galaxy-branded smartphones. Certainly, Samsung has to put this saga behind it somehow, and it’s difficult to see how it can do that without ditching “Galaxy” from its line-up.