The Note7 will cost Samsung another US$3 billion in profit

The company expects the financial impact from the fire scandal to continue into next year

The fallout from the Note7 debacle, which is expected to take a big chunk out of Samsung’s third-quarter profit, will keep hurting its business into next year, the company said.

The fourth-quarter impact on Samsung Electronics' operating profit will be "in the mid-2 trillion won range," the company said in a press release early Friday. Using the midpoint of 2.5 trillion South Korean won, that would be about US$2.2 billion. The damage will continue in the first quarter of next year, with an impact of about 1 trillion won, Samsung said.

The company announced Tuesday it had permanently stopped production of the Note7. It had launched a recall of the phone just weeks after it went on sale because of fires and explosions that destroyed some of the devices. Then, some replacement units it sent out as part of the recall had the same problem.

Also on Friday, the company said it would make significant changes in its quality assurance processes to enhance product safety for consumers.

Samsung didn't forecast how the Note7 incident would affect sales in the coming quarters, but said it will "normalize" its mobile business by expanding sales of other high-end phones, such as the Galaxy S7 and Galaxy S7 edge.

On Wednesday, the company estimated the Note7 problem would cut about 2.6 trillion won out of a third-quarter operating profit of 7.8 trillion won. It also expects to report revenue of about 47 trillion won, down from the 49 trillion won it had forecast earlier.

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Stephen Lawson

IDG News Service
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