October 14, 2016
The OEM has estimated huge financial impacts from the smartphone-related issues over the next year.
On its website, the OEM has estimated that a “negative impact” from ceasing production and sales of the Note 7 smartphone could cost it “approximately” ?3 trillion ($2.6 billion/€2.4 billion) in operating profit from the fourth quarter of 2016 through to the first quarter of 2017. While the OEM “already allocated the expected direct cost” in revised results for the third quarter yesterday, it has now added predictions of the effects thereafter.
It added that it “expects the drop in revenue from the discontinued sales to continue to have a negative impact on operating profit for the next two quarters”, adding that this will manifest as around ?2 trillion ($1.7 billion/€1.6 billion) in the fourth quarter and around ?1 trillion ($884.2 million/€802.2 million) in the first quarter. It released the predictions to “inform the market on the impact”, and “plans to normalise” the mobile business by “expanding sales of flagship models” as well as “focus on enhancing product safety for consumers by making significant changes in its quality assurance processes”.
Yesterday the OEM stated that “after recent incidents and in consideration of our consumers’ safety, Samsung Electronics stopped sales, exchanges and production of the Galaxy Note 7”, sharing “revised pre-earnings guidance which reflects the impact of this decision on the third quarter earnings”, having only last week revealed its predictions for third quarter results would see a profit “jump”.
Operating profit for July to September was expected to be ?7.8 trillion ($6.9 billion/€6.2 billion), but is now expected to be ?5.2 trillion ($4.5 billion/€4.1 billion), with Samsung having predicted the Note 7 issues “could have undercut mobile earnings by at least” ?1 trillion. Revenue for the quarter meanwhile was originally expected to fall 5.2 percent to ?49 trillion ($43 billion/€39 billion), less than analysts’ expectations of ?51.1 trillion ($45.8 billion/€41.1 billion), but the revised figures take this down further to ?47 trillion ($41.3 billion/€37.5 billion).
As The Recycler pointed out last week, Samsung did not reference the potential impact of Samsung’s deal last month with HP Inc, where the latter acquired Samsung’s printing business for $1.05 billion (€932.8 million). The Recycler had previously reported Samsung was mulling over a $1.8 billion (€1.6 billion) sale to HP Inc, after the Seoul Economic Daily outlined Samsung was “considering selling its printer business” as it “shifts focus to its core businesses”.
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