Samsung Electronics's recall of millions of big-screen smartphones isn't going to be cheap.
The South Korean company may spend as much as $1 billion, after deciding to replace all of the 2.5 million Note 7 phones that were shipped since they went on sale two weeks ago, according to estimates compiled by Bloomberg. Samsung would only say the amount was "heartbreaking.'' About three dozen of the devices were found to have batteries that caught fire and exploded.
The timing couldn't have been worse. Samsung was on a roll, with the success of its flagship Galaxy S7 helping to drive its shares to a record last month and lifting quarterly profit to the highest in two years - all of this in a sputtering global smartphone market. The Note 7 was supposed to complete a product lineup that would go head-to-head with new Apple. iPhones due to be unveiled this week. As the market leader in Android-based smartphones, Samsung couldn't risk any injury to its brand.
"The potential damage to reputation is far greater than short-term financial losses,'' said Chang Sea Jin, a professor at the National University of Singapore.
Estimates from Credit Suisse Group, Daishin Securities and Pelham Smithers Associates put the recall's cost at around $1 billion or less. Asked about the financial impact, Koh Dong Jin, the head of Samsung's smartphone business, said at Friday's press conference in Seoul that it was a "heartbreaking amount.''
Still, the estimated impact only represents less than 5 per cent of Samsung's projected net income of 23 trillion won ($20.6 billion) this year. And it's unclear whether part of the cost, if any, will be shouldered by Samsung SDI, the company's affiliated battery manufacturer. While Samsung hasn't said who supplied the Note 7's batteries, the battery company will probably also bear some of the cost of the recall. Samsung SDI supplied 70 per cent of the batteries to Samsung Electronics, which stopped ordering them, while Chinese battery maker Amperex Technology provided 30 per cent, the Korea Economic Daily reported.
SDI shares fell 3.2 per cent to 105,000 won at 9:30 am in Seoul on Monday, bringing their two-week decline to about 11 per cent. Samsung Electronics' stock was little changed.
Samsung Electronics gets about $600 of revenue and $108 of operating profit for every Note 7 it sells, Credit Suisse estimates. The company was probably aiming for shipments of 4 to 5 million units in the current quarter and 8 to 9 million in the final three months of 2016, said analysts led by Keon Han.
The bigger question in the coming weeks is how much damage the recall might inflict on Samsung's brand. After painful legal disputes with Apple, the... read full story
The South Korean company may spend as much as $1 billion, after deciding to replace all of the 2.5 million Note 7 phones that were shipped since they went on sale two weeks ago, according to estimates compiled by Bloomberg. Samsung would only say the amount was "heartbreaking.'' About three dozen of the devices were found to have batteries that caught fire and exploded.
The timing couldn't have been worse. Samsung was on a roll, with the success of its flagship Galaxy S7 helping to drive its shares to a record last month and lifting quarterly profit to the highest in two years - all of this in a sputtering global smartphone market. The Note 7 was supposed to complete a product lineup that would go head-to-head with new Apple. iPhones due to be unveiled this week. As the market leader in Android-based smartphones, Samsung couldn't risk any injury to its brand.
"The potential damage to reputation is far greater than short-term financial losses,'' said Chang Sea Jin, a professor at the National University of Singapore.
Estimates from Credit Suisse Group, Daishin Securities and Pelham Smithers Associates put the recall's cost at around $1 billion or less. Asked about the financial impact, Koh Dong Jin, the head of Samsung's smartphone business, said at Friday's press conference in Seoul that it was a "heartbreaking amount.''
Still, the estimated impact only represents less than 5 per cent of Samsung's projected net income of 23 trillion won ($20.6 billion) this year. And it's unclear whether part of the cost, if any, will be shouldered by Samsung SDI, the company's affiliated battery manufacturer. While Samsung hasn't said who supplied the Note 7's batteries, the battery company will probably also bear some of the cost of the recall. Samsung SDI supplied 70 per cent of the batteries to Samsung Electronics, which stopped ordering them, while Chinese battery maker Amperex Technology provided 30 per cent, the Korea Economic Daily reported.
SDI shares fell 3.2 per cent to 105,000 won at 9:30 am in Seoul on Monday, bringing their two-week decline to about 11 per cent. Samsung Electronics' stock was little changed.
Samsung Electronics gets about $600 of revenue and $108 of operating profit for every Note 7 it sells, Credit Suisse estimates. The company was probably aiming for shipments of 4 to 5 million units in the current quarter and 8 to 9 million in the final three months of 2016, said analysts led by Keon Han.
The bigger question in the coming weeks is how much damage the recall might inflict on Samsung's brand. After painful legal disputes with Apple, the... read full story
No comments:
Post a Comment
Have something to say?????