Samsung's Note 7 Discontinuation Poised to Cost Company $2.3 Billion

Wednesday October 12, 2016 5:39 AM PDT by Mitchel Broussard

Following confirmation that Samsung has discontinued the Galaxy Note 7 amid its well-publicized fire-catching problems, the company today gave the first indication of how much the move will cost it for the third quarter of 2016. In a report by Bloomberg, Samsung is said to have cut its third quarter operating profit by $2.3 billion and adjusted profit expectations from 7.8 trillion won ($6.9 billion) to 5.2 trillion won ($4.6 billion).

The company's projection "effectively erases all the mobile business profit that analysts had been projecting," with revenue expected to dive from 49 trillion won to 47 trillion won. On the wave of Samsung's woes, Apple shares reached a record high this year, but Samsung had yet to divulge its potential quarterly loss. Analyst Greg Roh said that Samsung's prediction accounts not only for defective units, but also "the inventories of Note 7s in the channel as well as the components they bought a few months back.”

Samsung Galaxy Note 7

“This is a huge cutback,” said Greg Roh, an analyst at HMC Investment Securities Co. “It means Samsung has reflected not only the sales loss from the shutdown but it also means it would bear the costs of the inventories of Note 7s in the channel as well as the components they bought a few months back.”

Samsung’s mobile division was projected to report operating income of 2.7 trillion won in the quarter, according to estimates compiled by Bloomberg. HMC’s Roh said the revised outlook probably erased that number. “We expected the mobile division to see about 2.6 trillion won previously but it will only see a mere 0.3 trillion won in the third quarter,” he said.

Samsung's manufacturing division -- which sees the output of semiconductors, glass panels, appliances, and other materials -- is expected to keep the company profitable for the quarter.

As the recall of Samsung Galaxy Note 7 phones continues, the company has begun delivering fireproof shipping boxes to customers affected by the exploding smartphone (via TechCrunch). In one video shared by XDA Developers, the contents of the box are revealed to include three smaller boxes within the larger packaging and a static shield to place the Note 7 in.


The outside of the shipping container notes that it is "forbidden" to transport the contents of the box by aircraft, and can only be returned via ground shipment. Samsung's return box contents also include plastic gloves, reportedly due to the surface of the fireproof layer inside the main package having the potential to irritate some people's skin.

Top Rated Comments

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45 months ago

What a shame. Guess this what happens when you actually innovate with a product and push the boundaries.

Not everybody likes to churn out the same phone for three years...
iPhone 6, iPhone 6s, iPhone 7

Pahahaha. I'll take double per-core performance and reliability over a product that "innovates" and blows up. What's so innovative about the Note 7 anyway? I keep asking and nobody seems to have an answer. Even the iPhone 6S makes mincemeat of it.

I think what you meant to say is: "Guess this is what happens when you desperately push every known gimmicky feature into a phone, because you can't compete on support or performance, or have the self-control to ask yourself if an additional feature would improve the device."
Score: 17 Votes (Like | Disagree)
Avatar
45 months ago
I am not a samsung fan, but this makes me feel sorry for them. Hopefully they will learn from this and implement better quality control.
Score: 13 Votes (Like | Disagree)
Avatar
45 months ago

What a shame. Guess this what happens when you actually innovate with a product and push the boundaries.

When your devices are blowing up and you not only didn't catch it during development, but you still cannot figure out the reason why two months after they've gone on sale, that's not innovation. That's negligence.
Score: 12 Votes (Like | Disagree)
Avatar
45 months ago

What a shame. Guess this what happens when you actually innovate with a product and push the boundaries.

Not everybody likes to churn out the same phone for three years...
iPhone 6, iPhone 6s, iPhone 7

If it blows up, it's not innovation.
Its failure.
Score: 12 Votes (Like | Disagree)
Avatar
45 months ago
$2.8B only for the fire proof return boxes.
Score: 10 Votes (Like | Disagree)
Avatar
45 months ago

What a shame. Guess this what happens when you actually innovate with a product and push the boundaries.

Not everybody likes to churn out the same phone for three years...
iPhone 6, iPhone 6s, iPhone 7

This is the first time they've innovated then? And Apple never has?
Score: 9 Votes (Like | Disagree)

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