Samsung Sales, Profits Dive on Note 7 Recall

Samsung's smartphone division struggled to breakeven between July and September as sales plunged due to the recall of its high-end Note 7. The smartphone giant said quarterly sales in its IT and Mobile Communications division were down 15 percent on the same period last year to 22.5 trillion Korean won (US$19.8 billion) while operating profit crashed 95 percent to 100 billion won. From a PCWorld report: Problems with the Note 7 starting hitting sales shortly after it went on sale in mid-August. By early September, reports that several units had caught on fire prompted Samsung to begin a costly recall and replacement program. When it became clear that the replacements had the same problem, Samsung pulled the phone for good. Perhaps remarkably, Samsung said it saw no significant effect during the quarter on sales of its two other high-end handsets, the Galaxy S7 and S7 Edge, but it conceded that "regaining consumer confidence" will be a key objective in the months ahead. And for the current quarter, which includes the key year-end sales period, Samsung said it expects profit in the smartphone divison to bounce back to normal levels due to solid sales of the two flagship phones and increasing sales of mid-level Galaxy A- and J-series handsets. "As for 2017, the company anticipates a turnaround with the launch of new flagship smartphones," it said in a statement. "Next year will also see expansion of Samsung Pay rollouts and cloud-related services as well as the introduction of artificial intelligence related offerings."

Wow!

[frovingslosh]

Their profits and sales dropped after a massive recall and their products and even their replacements bursting into flame? I did not see that coming!

Re:Wow!

[tripleevenfall]

I was hopeful they'd have a good quarter, but then again, I've been burned by Samsung before.

Re:

[K. S. Kyosuke]

It's a won-won situation! (They have two wons remaining.)

How is this news?

[It's the tripnaut!]

Was anyone actually expecting better profit margins because of the recall?

My plan for a Samsung turnaround

[JoeyRox]

Their Sales VP needs to burn the midnight oil to come up with a plan that lights a fire under the sales team to return the company to the explosive sales growth they used to enjoy.

Re:My plan for a Samsung turnaround

[vux984]

Their Sales VP needs [...] to come up with a plan that lights a fire under the sales team

Easy. Make the sales team sit on the recalled note 7s.

Re:

[OneHundredAndTen]

They'll need something like that rekindle their self-esteem. I don't think they are bursting with pride these days.

Re:

[rtb61]

I hope it is not that idiot who decided they could save $5 per phone by eliminating user removable batteries and boost sales by killing future resale of used Samsung phones, that dude cost them billions and will likely to try to keep their job by trying to keep fixed batteries (I wonder how many decades it will take for the tiny savings in going from a user replaceable battery to a fixed battery compared to the losses created by doing that, if ever).

They need a big success

[Oswald McWeany]

They need a big success to life them up after the Note 7.

They have a lot of respect and goodwill from other buyers. I know my wife won't buy any phone that isn't Samsung. (I had one Samsung phone I loved, but I shop around more personally- I'm not brand loyal about anything).

Another mistake like this though would really hurt Samsung. One mistake and most buyers will forgive, a second big mistake and they could rapidly lose market share.

Re:

[dgatwood]

One mistake and most buyers will forgive, a second big mistake and they could rapidly lose market share.

Fortunately for Samsung, most buyers have poor memory. I just about gave up on the Blu-Ray format because I had so much trouble with two of their players lasting only a year or so before they stopped reading discs reliably. When I replaced my refrigerator, I seriously considered the Samsung, because (IIRC) its reviews showed ridiculous numbers of people saying that they stopped keeping food cold because

Re:

[thsths]

I do wonder why people buy Samsung. I got a used one for cheap, and I admit that the hardware is very nice, but the software is just terrible, and also terribly out of date. It was a flagship phone, it cost an insane amount of money new, and it was only supported for just over a year from launch. I am pretty sure it was still being sold when it was already out of support.

So clearly Samsung is not looking after the customer, that should be perfectly obvious from every single phone they make. Why do people st

2017 Forecast

[hcs_$reboot]

Samsung Sales, Profits Rise despite the 2016 Note 7 Recall

Barely Profitable

[VorpalRodent]

I'm not totally up on my corporate accounting / investment info, but this sounds to me like - after a massive recall, they're still operating at a (admittedly tiny) profit. I'm sorry, but if you can have your products explode on people and still be in the black you're doing pretty well.

Re:

[Anonymous Coward]

That's my take as well. A company the size of Samsung should have the reserves and inertia to survive an enormous loss, but it turns out that they don't have to, because even through this exceptional catastrophe they still turned a profit.

Obligatory

[Anonymous Coward]

Netcraft confirms it.

Re:

[unixisc]

6. Unlike Apple, which is the only iOS phone vendor, Samsung makes Android phones, which every other smartphone vendor makes, and can therefore challenge Samsung on anywhere on the price/features spectrum

Make a phone with a replaceable Battery

[Mr. Droopy Drawers]

I've sat out two upgrade cycles waiting on Samsung to come up with a viable replacement for the S5. I want a battery that can be replaced by mere mortals. It doesn't have to be as easy as the S5 to do so. But, it needs to be replaceable during its lifespan without sending it off to timbuktu.

Seems to me the whole exploding phone business wouldn't have happened had they not been bowing down to the god of thinness. S5 is a great form factor. Why do you need it smaller?

Re:

[thegarbz]

I want a battery that can be replaced by mere mortals.

Why? No seriously why? I'm interested in the use case, especially since longevity doesn't seem to come into it since you're so keen to replace the device.

Re:

[rasmusbr]

I want a battery that can be replaced by mere mortals.

Why? No seriously why? I'm interested in the use case, especially since longevity doesn't seem to come into it since you're so keen to replace the device.

He could be planning on selling or gifting the phone after he's used it for a year himself. It's not an uncommon use case. Niche maybe, but not unheard of.

There is probably a good niche out there for a high end phone with a user-replaceable battery, but I don't think Samsung is interested in it. They won't do it unless Apple does it and apple is never, ever even going to consider doing it. The wear and tear is pretty much the only thing that will keep Apple's customers upgrading their iPhones. A replaceable

Re:

[thegarbz]

That is a market that disappears with trade-ins, and ignores the fact that there are people who will happily buy devices without replaceable batteries and replace them anyway / refurbish them.

Plus about the only batteries I can still get for my S4 are non-genuine likely to explode in my face Alibaba specials, so I don't see this as being a major benefit unless manufacturers continue to support the removable batteries ... which they don't.

Suprised that their midlevel phones are selling...

[iampiti]

well. I've found the A and J series to be mediocre and expensive for what they are. Their 2 year old flagships for 300€ are not a bad deal in my opinion.

It could be worse ...

[gordguide]

Just this morning I read a news report from South Korea (English media) that said 85% of buyers of the Note7 in South Korea have so far refused to turn in their phones. It seems likely that a similar sentiment, regardless of exactly what percentage, exists in other markets.