Samsung has revealed the full extent of its Galaxy Note 7 woes as the company’s latest earnings report highlights a massive slump in profits.
For the period between July and September 2016, Samsung’s operating profit fell by KRW 2.19 trillion (£1.58 billion) to KRW 5.20 trillion (£3.74 billion) – that’s a massive 30% slump. And revenue also took a hit, with turnover falling by KRW 3.87 trillion (£2.79 billion) to KRW 47.82 trillion (£34 billion).
Samsung is pinning most of the blame on the Galaxy Note 7 recall, stating: “For the IT & Mobile Communications Division, earnings declined due to the Galaxy Note 7 discontinuation.”
It continued: "Earnings for the display business are projected to improve year on year due to recovery in LCD, amid declines in flexible OLED panel shipments quarter-on-quarter resulting from the discontinuation of the Galaxy Note 7.”
Samsung announced the Galaxy Note 7 on August 2, but was forced to issue a global recall for the handset exactly one month later, after an internal investigation uncovered a serious battery flaw that was causing some users’ handsets to overheat and catch fire. Shortly afterwards, Samsung began issuing replacement devices, only to find that users were still reporting overheating issues. As a result, the Galaxy Note 7 is no longer in production, and Samsung is urging all users to turn their phones off and send them back.
But according to Samsung, its mobile division found a saving grace in the form of the very popular (and less fiery) Galaxy S7: “The Mobile business saw its earnings decrease significantly quarter-on-quarter due to the effects of the discontinuation of the Galaxy Note 7. However, smartphone shipments remained solid due to continued stable sales of its existing flagship devices, including the Galaxy S7 and S7 Edge, and steady growth in the mid-tier Galaxy A and J series.”
Samsung now reckons that earnings in the mobile business will recover to last year’s levels for the fourth quarter, led by “solid sales of the Galaxy S7 and S7 Edge”. And there's a good chance that next year's Galaxy S8 will give Samsung a chance to recoup some of the losses incurred by the ill-fated Note phone.
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Do you think Samsung's Note brand can survive this year's fiery fiasco? Let us know in the comments.