Samsung will likely take a $17 billion hit on the Galaxy Note 7
The Galaxy Note 7 got off to a very promising start a couple of months ago. Samsung was set to have one of its best years as earnings were buoyed by the spectacular performance of the Galaxy S7. Merely two weeks after the flagship was released reports of a potential battery cell defect starting pouring in and Samsung soon recalled all units. It then sent out replacement units which were supposed to be safe and they started having the same problem as well. Earlier today Samsung announced that it was officially halting sales and replacements of the Galaxy Note 7 and just a few hours ago the company confirmed that it will no longer produce the flagship. The Galaxy Note 7 is dead and Samsung is likely going to take a $17 billion hit.
When the Galaxy Note 7 was recalled, it was estimated that the cost of replacing more than two million units is going to be over $1 billion. That’s no longer the case. Samsung is without a flagship smartphone to sell in the upcoming holiday season and the lost sales will add up quickly. Analysts at Credit Suisse estimate that lost sales of up to 19 million units will cost the company around $17 billion. Analysts had previously estimated that missed sales and the cost of the recall will amount to $5 billion if Samsung started selling the Galaxy Note 7 in the fourth quarter of this year. Now that the flagship is dead the financial impact will be greater.
Then again, it’s not the end of the world for Samsung. The company has a market value of more than $235 billion and is sitting on record-high cash reserves of over $69 billion. It can certainly absorb the impact, and we can be sure that Samsung will have no intention of ever going through something like this again.Via