The Note 7 turned out to be a disaster for Samsung’s reputation, but the fiasco will also have a serious impact on its finances, to the tune of billions.
Samsung revised its earnings estimate for Q3 2016, cutting profits expectation by a third.
As recently as last week, the company was predicting that the Note 7 recall would only have a limited impact on its earnings. Samsung stock hit record highs on the news. But then came a string of incidents involving the replaced Note 7, and yesterday, Samsung announced that the flagship smartphone was officially cancelled.
In light of the cancellation, Samsung revised its estimated profit for Q3 to 5.2 trillion won (around $4.6 billion), down from 7.8 trillion won ($7.0 billion) in the previous guidance. Revenue is now estimated at 47 trillion won instead of 49 trillion won.
The final Q3 results will be out by the end of the month.
The Note 7 fires will cost Samsung at least $2.4 billion, and that’s just for Q3 (July to September). The next quarters will probably be just as depressive. While incomplete, this is the first official indication of the cost of the Note 7 fiasco.
Analysts cited by Bloomberg say the Note 7 cancellation would decimate the Q3 profits of Samsung’s mobile division. HMC Investment Securities cut down its estimate for the mobile business to 0.3 trillion won ($266 million), from 2.6 trillion won ($2.3 billion).
Fortunately for Samsung Electronics, it still makes a lot of money from its other divisions, chiefly its component and display manufacturing arms.
So while the Note 7 will leave it bruised, Samsung will continue to churn out money at an incredible pace. The question is, how soon can the mobile division recover?