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The true impact of Samsung’s discontinuation of its Galaxy Note7 smartphone will cost the company approximately $2.6 billion (mid-3 trillion Korean won) in operating profit across Q4 2016 and Q1 2017. Most of that will be realized during the last quarter of the year. Moving forward, Samsung said that it “plans to normalize its mobile business by expanding sales of flagship models such as the Galaxy S7 and Galaxy S7 edge.”
In a release, the electronics manufacturer shared that it will increase its focus on improving product safety for consumers by enacting “significant changes” to its quality assurance process.”
Samsung’s announcement comes a day after it revised its earnings guidance for the third quarter, saying that consolidated sales would be approximately $42 billion (47 trillion Korean won) and reduced operating profits by $4.6 billion. Today’s $2.6 billion cost will be in addition to whatever impact it will have in Q3.
As a recap: In August, Samsung introduced the Galaxy Note7, a sequel to its Note5 with many of the bells and whistle features from the Galaxy S7 series and an updated S-Pen stylus. It was lauded by many for being a pretty good productivity phone, but then the trouble began by September with reports of some phones catching on fire. The company was slow to issue a recall, saying that it was investigating.
“In response to questions on Galaxy Note7, we are conducting a thorough inspection. We will share the findings as soon as possible. Samsung is fully committed to providing the highest quality products to our consumers,” a company spokesperson said prior to the recall in a statement provided to VentureBeat.
Eventually a voluntary recall was enacted by the company, although only after U.S. regulators issued a statement warning about the device’s potential health hazard and recommending that you don’t use the device. However, there were still issues following the initial recall, which resulted in all major U.S. phone carriers declaring they’ll no longer sell the Galaxy Note7. Consequently, Samsung has asked device owners to return the phones, permanently discontinuing the model. It is offering $100 credit to those who purchased the device, acknowledging 96 reports of overheating Note7s, with 23 coming after the recall.
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