Samsung just filed its third quarter earnings report, and the results are not looking good. The company’s net profit fell 16.8 per cent following the disastrous launch and unprecedented recall of the Galaxy Note7 smartphone launch. Samsung’s mobile division is reporting the lowest quarterly profit in more than six years, back when its first Galaxy phone came out. Ouch!
It’s going to take years to determine the true cost of Samsung’s failed Galaxy Note7 launch, but early estimates are already showing the company lost billions. Samsung claims the cost of discontinuing the Note7 will amount to about $US3 billion ($3.9 billion), but that obviously doesn’t include future losses from its tarnished reputation. Whether people continue to buy Samsung phones remains to be seen.
Despite reporting a historic loss in its mobile division, Samsung remains optimistic about its future. The company said in a statement that it expects profits next quarter to return to levels similar to last year at around $US2 billion ($2.6 billion). This quarter, however, the mobile division made an operating profit of $US87.9 million ($115.8 million), a staggering 96 per cent decrease from one year ago.
In a statement, the company said that it expects its mobile division to fully recover next quarter led by sales of the Galaxy S7 and S7 Edge.
Looking ahead to the fourth quarter, the company expects earnings to improve YOY driven by strong performance in the components business. The mobile business expects a recovery in its earnings to a similar level with that of the fourth quarter of 2015, led by solid sales of the Galaxy S7 and S7 edge.
We’ll believe it when we see it. The Galaxy S7 and S7 Edge, released in March of this year, are already outdated when compared to newer phones like the iPhone 7, iPhone 7 Plus and Google Pixel. And if the world needs more reasons not to buy the Galaxy S7 phones this holiday season, Samsung is expected to launch a new flagship phone unofficially dubbed the “Galaxy S8” in February. The company is expected to add artificial intelligence to the phone similar to Apple’s Siri or Google Assistant. Samsung bought AI company Viv Labs in October.
It’s going to be interesting to see if Samsung can ever fully recover from this global disaster as we head into the holiday season. The Galaxy Note7 was actually met with a warm reception from tech blogs (including a favourable review by Gizmodo) before the phones started exploding. I just don’t know if I will ever trust having a Samsung phone in my pocket ever again.