Analysts: Galaxy Note 7 Recall To Hurt Samsung's Q3 Profits

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The Galaxy Note 7 was supposed to be the device that would establish Samsung's superiority over its competitors, but unfortunately for the South Korean company, that was not to be. As has been widely reported in large sections of the mainstream media around the world, reports of the Galaxy Note 7 exploding forced Samsung to issue an unprecedented global recall of around 2.5 million units of its premium phablet. It was on September 2nd that the company made the announcement to temporarily halt sales of its latest flagship smartphone and replace the ones that had already been sold. While Samsung Electronics says that the batteries manufactured by its group company, Samsung SDI, is to blame for the critical flaw that's been causing the fires, the controversy will, nonetheless, reflect poorly on its Q3 results, as is to be expected.

According to market analysts in South Korea, Samsung will see an 8.6% sequential drop in profits this quarter because of the controversy. If the consensus estimate of analysts is anything to go by, the company is likely to earn profits of 7.4 trillion won ($6.7 billion) during the current quarter, which would be significantly lower than the previous estimates from various brokerage firms in the country. While most analysts originally estimated Samsung Electronics to earn between 8.2 trillion won ($7.3 billion) to 8.5 trillion won ($7.6 billion) during the current quarter, just about all of them have downgraded their estimates following the developments of the past few weeks. The company had reported profits of 8.14 trillion won ($7.23 billion) in Q2 2016.

As for the current situation meanwhile, all major securities firms in the country agreed that the company will lose over $1 billion just from the recall, without counting any associated costs. The company's mobile division is now expected to earn just about 2.6 trillion won ($2.3 billion) in Q3 2016, instead of the 4.1 trillion ($3.6 billion) it was originally expected to earn during the period. With the Galaxy Note 7 out of the picture in the short term, Samsung's biggest rival, Apple, is expected to be the main beneficiary, with its latest smartphones, the iPhone 7 and 7 Plus, expected to cross 100 million in sales by the end of this year.

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