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The Galaxy Note7 crisis could cost Samsung at least US$2.34 billion

By Cookie Monster - on 13 Oct 2016, 1:00am

The Galaxy Note7 crisis could cost Samsung at least US$2.34 billion

Image source: The Verge via Brian Green

Earlier last month, Credit Suisse Group AG, Daishin Securities Co. and Pelham Smithers Associates estimated that Samsung could spend US$1 billion to replace 2.5 million units of the Galaxy Note7. This figure is very likely to more than double based on Samsung's quarterly profit guidance.

According to Bloomberg, Samsung has cut its third-quarter operating profit by US$2.34 billion after ending the production of the Galaxy Note7. This could be the first official estimate of the financial damages the company has to suffer over the Galaxy Note7 crisis. 

Bloomberg - “This is a huge cutback,” said Greg Roh, an analyst at HMC Investment Securities Co. “It means Samsung has reflected not only the sales loss from the shutdown but it also means it would bear the costs of the inventories of Note 7s in the channel as well as the components they bought a few months back.”

Another analyst at Nomura Holdings Inc. predicts that the Galaxy Note7 crisis could cost Samsung about US$5 billion in operating profit through 2017. Putting aside analyst estimates, the financial impact for Samsung may potentially be more. 

You have to take into account the amount of funding which went into the research, development, manufacturing and marketing of the device. In addition, Samsung not only has to deal with potential lawsuits or fines from consumers and authorities, it also has to compensate its retail partners and telcos worldwide for the loss in revenue. 

Source: Bloomberg via Engadget

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